(Bloomberg Businessweek) -- When New York short seller Hindenburg Research LLC accused the Adani Group of stock manipulation and accounting fraud last year, the Indian conglomerate’s shares plummeted—raising concerns about whether the country’s markets deserved their reputation as the next big thing. This summer, Hindenburg fired off another salvo, alleging that Madhabi Puri Buch, chair of the Indian market regulator, had a conflict of interest and had blocked a thorough probe into Adani.
But after a short period of hand-wringing in the wake of Hindenburg’s Jan. 24, 2023, report, India’s stock market has added $1.6 trillion in value and is neck and neck with Hong Kong’s to be the world No. 4. The benchmark NSE Nifty 50 Index, poised to cap a record ninth year of gains, has generated a total return in excess of 250% in local currency terms since 2015. That’s in large part because India is the world’s fastest-growing major country, with the International Monetary Fund saying it will edge ahead of Japan and Germany to become the third-largest national economy by 2027.
Following the Hindenburg report, the Adani Group spent much of 2023 in damage control—paying down debt, delaying some capital expenditure and assuaging investor concerns through road shows across the world’s financial hubs. Today it’s expanding again, raising funds for projects such as a $10 billion chip plant near Mumbai and a seaport in Vietnam, and for the purchase of various other port operations around the globe. Hindenburg’s report was “more of a short-term nuisance than a long-term hurdle to India’s growth narrative,” says Anirudh Garg, a partner at Invasset in Mumbai.
When Hindenburg released its 100-page report on Adani’s sprawling empire, investors worldwide took notice. Hindenburg had built its reputation with successful bets against companies ranging from electric-vehicle maker Nikola Corp. to meme stock Mullen Automotive Inc. Adani was its biggest target by far, and the campaign marked a rare foray into India by a US short seller.
Hindenburg accused the conglomerate of “brazen” market manipulation and accounting fraud, calling it “the largest con in corporate history.” The report alleged the Adani Group used a web of family-owned shell companies in tax havens to inflate revenue and manipulate stock prices. It claimed those entities facilitated corruption, money laundering and taxpayer theft while siphoning money from the group’s publicly traded companies.
This summer, the Securities and Exchange Board of India, India’s market regulator, wrote a letter to Hindenburg saying the report contained inaccuracies intended to mislead readers. Hindenburg responded with a missive of its own, calling out SEBI for inaction over Adani. Hindenburg declined to comment for this story.
In August, Hindenburg published a second report, saying SEBI chief Buch and her husband had invested in offshore funds linked to Vinod Adani, the group founder’s brother. Buch acknowledges the investment, but she’s denied any wrongdoing, saying she sold the investment in 2018, four years before her appointment as head of SEBI. The regulator says its rules require members to disclose any conflicts of interest, and Buch says she’s always done so. The Adani Group says Vinod Adani has no role in any of its listed companies.
In early September, Hindenburg published a post on X saying Swiss prosecutors are investigating a person linked to the Adani Group for money laundering. Hindenburg cited court records showing that Switzerland has frozen more than $310 million as part of a yearslong probe. Although the documents were anonymized, the case involves Adani Group, according to a person familiar with the situation who asked not to be named discussing private information. Swiss prosecutors declined to comment.
Adani called the allegations regarding any Swiss probe “baseless,” and investors seem to agree. Some Adani Group stocks dipped on the news, but their combined value is now higher than it was before Hindenburg’s post. And even though India’s economic growth has slowed somewhat and many investors fear India’s shares have gotten overpriced, the benchmark stock index has continued to climb, notes Vikas Khemani, founder of Carnelian Asset Management & Advisors Pvt. Ltd. “The market,” he says, “is taking their allegations with a pinch of salt.” —With Katherine Burton, Hugo Miller and Chiranjivi ChakrabortyRead next: Stock Market Mania Takes Hold Deep in Hinterlands of India
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