Shares of Adani Group continued to bleed on Monday for the third straight trading session after a report by US-based firm Hindenburg Research accused the conglomerate of stock manipulation and improper use of offshore tax havens.
The losses in investor wealth in Adani stocks rose to nearly Rs 5.4 lakh crore in afternoon trading on Monday, according to Reuters.
In a report published last week, Hindenburg had claimed that key listed companies of the Adani Group are on a “precarious financial footing”. It had also alleged that the conglomerate headed by India’s richest person, Gautam Adani, has amassed substantial debt by pledging overvalued shares.
Shares of the Adani Group started dwindling soon after the report came out last Wednesday, and the rout continued on Friday. The markets were closed on Thursday on account of Republic Day. Investor sentiments did not improve over the weekend as most of the group’s stocks kept losing as markets opened on Monday.
At 2.20 pm, the flagship stock Adani Enterprises was gaining more than 2%. But all the other stocks of the group were facing losses – Adani Ports (1.77%), Adani Transmission (20%), Adani Green Energy (20%), Adani Total Gas (20%), Adani Power (5%), Adani Wilmar (5%).
The overall 30-share BSE Sensex was down more than 176 points (0.30%).
Adani vs Hindenburg since the report
In its report, Hindenburg Research had said that it holds short positions in the Adani Group companies through US traded bonds and non-Indian-traded derivative instruments. Short positions are “created when a trader sells a security first with the intention of repurchasing it or covering it later at a lower price”, according to Investopedia.
Investment research firms like Hindenburg often engage in “activist short selling”, or making information about companies public in order to trigger a fall in their share prices.
Soon after the report came out on Wednesday, Adani Group had called it “a malicious combination of selective misinformation and stale, baseless and discredited allegations”.
On Sunday, the conglomerate issued a 413-page response, in which it described the Hindenburg Research report as a “calculated attack” on India and its institutions. The Adani Group alleged that the mala fide intention of Hindenburg was apparent as the report was released ahead of a $2.5 billion share sale by its flagship firm Adani Enterprises.
“It is tremendously concerning that the statements of an entity sitting thousands of miles away, with no credibility or ethics has caused serious and unprecedented adverse impact on our investors,” the Adani Group said.
On Monday morning, Hindenburg retorted saying Adani Group cannot obfuscate its fraud by nationalism.
“We also believe India’s future is being held back by the Adani Group, which has draped itself in the Indian flag while systematically looting the nation,” Hindenburg Research said in a statement. Its said that the Adani Group had not given specific answers to 62 of the 88 questions the research firm had posed in its report.
“...It mainly grouped questions together in categories and provided generalised deflections,” Hindeburg said. “In other instances, Adani simply pointed to its own filings and declared the questions or relevant matters settled, again failing to substantively address the issues raised.”
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