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Hindenburg Research’s expose: Adani Group to go forward with planned IPO

As the Adani Group tries to grapple with the Hindenburg Research report that accused them of financial fraud, mounting debts and offshore tax havens, the former has announced that it will go forward with the planned initial public offering (IPO) as scheduled.

In a statement, Adani Group said, “There is no change in either the schedule or the issue price. All our stakeholders including bankers and investors have full faith in the FPO (Follow on Public Offer). We are extremely confident about the success of the FPO.”

However, bankers have expressed serious concerns, three people familiar with the matter told Reuters on Saturday.

“Everyone was shocked. They did not expect such a poor response,” one source said. They plan to either extend the subscription closing date by four days or lower the price.

The Hindenburg Research expose

On January 26, Hindenburg Research’s report called out the conglomerate’s “substantial debt”, which includes pledging shares for loans; that Adani’s elder brother Vinod “manages a vast labyrinth of offshore shell entities” that move billions into group companies without required disclosure; and that its auditor “hardly seems capable of complex audit work”.

Hindenburg Research believed India was a vibrant democracy and an emerging superpower with an exciting future and it was the Adani Group which was holding it back through “systematic loot”.

Soon after the expose, Adani’s share fell down by 20% and then 11% below the minimum offer price of the secondary sale. Adani himself lost in excess of USD 20 billion, or about one-fifth of his total fortune.

It lost Rs 3.37 lakh crore in aggregate market capitalisation in a single day. Life Insurance Corporation (LIC), the single largest non-promoter domestic shareholder in five of the largest Adani Group companies by market capitalisation, lost Rs 16,627 crore due to a drop in the value of its Adani Group holdings.

The value of LIC’s Adani Group assets fell from Rs 72,193 crore on Tuesday to Rs 55,565 crore on Friday, a 22% drop in only two days.

Meanwhile, LIC’s share price declined 3.5% during the day on Friday, falling 5.3% in the prior two days.

On January 29, the Adani Group responded to the allegations and narrative peddled by Hindenburg Research in a 400-page response.

The group alleged that the report was not an attack on any specific company but a “calculated attack” on India, its growth story, and ambitions.

Replying to the claim, Hindenburg Research tweeted, ‘Fraud Cannot Be Obfuscated By Nationalism Or A Bloated Response That Ignores Every Key Allegation We Raised’.

It welcomed Adani Group’s decision to take legal action but stated that they file a suit in the United States where they operate. However, if Adani fails to move forward with legal proceedings, then they stand corrected.

In a statement, Hindenburg Research said, “In the 36 hours since we released the report, Adani hasn’t addressed a single substantive issue we raised. At the conclusion of our report, we asked 88 straightforward questions that we believe give the company a chance to be transparent. Thus far, Adani has answered none of these questions,” the statement read.

“If Adani is serious, it should also file suit in the U.S where we operate. We have a long list of documents we would demand in a legal discovery process,” the statement concluded.

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