Adani Group mulling legal action against Hindenburg over 'malicious' accusations
What's the story
Adani Group, led by Asia's richest man Gautam Adani, is exploring legal action against Hindenburg Research after the US-based short-seller accused the conglomerate of stock manipulation and accounting fraud.
Post Hindenburg's accusations, Adani Group companies lost Rs. 85,761 crore in market value on Wednesday.
Meanwhile, Adani's fortune also took a nosedive. Per Bloomberg Billionaire's Index, he lost about $6 billion in a day.
Context
Why does this story matter?
The report by Hindenburg Research comes at a time when Adani Group is readying for India's largest FPO (follow-on public offer). Public subscription for Adani Enterprise's Rs. 20,000 core worth FPO is set to begin on Friday.
The report, whether true or not, is enough to raise suspicion in the minds of investors, which might prevent the company from achieving the desired outcome.
Report
What did the Hindenburg report say?
In its 129-page report, which the activist firm claims took two years to complete, Hindenburg Research accused Adani Group of creating and managing "a vast labyrinth of offshore shell entities" in tax havens.
The report claims that some of these entities were used for market manipulation. The report also flagged the group's high debt and sky-high valuations of its seven listed companies.
Response
How did Adani Group respond to the accusations?
Jugeshinder Singh, the chief financial officer of the group, called the allegations a "malicious combination of selective misinformation, stale, and baseless and discredited allegations that have been tested and rejected by India's highest courts."
The CFO also said that the timing of the report suggests a mala fide intention to undermine Adani Enterprises' upcoming FPO.
Malicious
Adani Group's legal head calls the report 'maliciously mischievous'
Now, in a fresh media statement, Jatin Jalundhwala, the group's legal head, has doubled down on the attack.
"The maliciously mischievous, unresearched report published by Hindenburg Research on 24 January 2023 has adversely affected the Adani Group, our shareholders, and investors," he said.
He added that the report created "volatility in Indian stock markets" and "unwanted anguish for Indian citizens."
Short seller
Hindenburg will benefit from a fall in Adani shares
Short sellers like Hindenburg make money by betting that the stock price of the companies they target will fall. In its report, Hindenburg said that it has taken a short position in Adani Group companies.
Jalundhwala said that the report was designed to have a "deleterious effect" on the share value of Adani Group companies, as Hindenburg will benefit from such a slide.
Legal action
Adani Group is evaluating punitive and remedial actions
"We are deeply disturbed by this intentional and reckless attempt by a foreign entity to mislead the investor community and the general public, undermine the goodwill and reputation of the Adani Group and its leaders, and sabotage the FPO," Jalundhwala said.
He added that the group is evaluating relevant provisions under the US and Indian laws for punitive and remedial action against Hindenburg Research.