(Original title: The crisis intensifies! Hindenburg’s precise sniping of Adani’s fraud gradually surfaced)
News from the Financial Associated Press, February 5 (edited by Niu Zhanlin)The US short-selling agency Hindenburg published a scathing report last week, accusing Adani Group of fraud and other misconduct. Since then, the stocks of Adani Group companies have been under pressure. Also shrinking rapidly. While the Adani Group denies the allegations, developments are turning against it.
In the 104-page report, published on Jan. 24, Hindenburg accused Adani of widespread fraud, including using shell companies to inflate its stock price and flouting India’s shareholding rules.
The Adani Group also fought back against Hindenburg’s attack. In an official statement on January 25, the Adani Group said it was appalled by the report, which it described as a “malicious combination of selective misinformation and banal, baseless and discredited allegations”.
Illegal holding of offshore companies
However, according to the latest investigation by the media, Hindenburg’s allegations are not groundless. It is reported that one of the major shareholders of Adani Power, the core energy company under the Adani Group, is an offshore company called Opal Investment.
In its latest quarterly report, Adani Power described Opal as an independent shareholder, meaning Opal has no other relationship with the Adani Group other than its 4.69% stake in Adani Power.
However, a media investigation found that Opal was incorporated in Mauritius by Trustlink International, a financial services company linked to the Adani family.
Documents from Mauritius show that one of Trustlink’s directors, Louis Ricardo Caillou, sits not only on the board of Opal, but also on the board of another Mauritian company, Krunal Trade & Investment. Adani’s older brother Vinod Adani and Adani Family Office chief executive Subir Mittra are also listed as members of the company’s board.
Whether Adani executives or family members exerted influence over the investment decisions of companies such as Opal is at the heart of Hindenburg’s allegations.
In his book “Gautam Adani,” published last year, it was noted that Adani sees his older brother Vinod, who has long played a central role in raising capital for the Adani group, as a father figure. Financial institutions around the world are extremely closely linked.
Under rules set by the Securities and Exchange Board of India, companies with less than 25% free float risk being delisted. Members of the Adani family and companies publicly disclosed to be associated with Adani owned 74.97% of Adani Power in the third quarter of the fiscal year ended March 31, company filings show. Opal’s stake in Adani Power represents almost 19% of the independent shareholder’s stake in Adani Power.
Hindenburg said that the company has searched all the company registries in Mauritius, established its own searchable database, and will conduct research on related companies to find correlations and similarities.
This series of discoveries almost hammered Hindenburg’s key allegations, confirming that Adani used offshore companies to illegally control a high degree of control.
crisis intensifies
Since Hindenburg’s short-selling report, seven Adani listed companies have lost more than $100 billion in market value. And as the scandal continues to ferment, Adani’s crisis is intensifying.
At present, Moody’s, an international rating agency, has questioned Adani Group’s ability to raise funds, while Standard & Poor’s directly downgraded the ratings of two listed companies under Adani Group. S&P Dow Jones Indices said it would remove Adani Enterprises, the flagship of Adani Group, from its sustainability index. Rating agency Fitch believes that its rating will not be directly affected.
Standard Chartered Bank has stopped accepting Adani Group bonds as collateral for margin loans, Indian media ET Now reported. Standard Chartered has asked its private clients to make up the collateral shortfall, the report said. It follows similar moves by Citigroup’s wealth arm and Credit Suisse Group AG.
Indian policymakers and regulators moved to reassure investors on Saturday, saying that despite a recent sharp drop in shares of Adani Group companies, Indian financial markets remain stable and continue to operate in a transparent and efficient manner.
On the same day, India’s Finance Minister Sitharaman said that from a macroeconomic perspective, the Adani issue was “a storm in a teacup”. The RBI has assured that the exposure of major banks to Adani Group is within limits.
Indian billionaire Uday Kotak pointed out that although the Adani crisis will not bring systemic risks to the Indian financial system, large Indian companies rely on the global market for financing, and the financing of related companies will be suppressed in the short term.