What you need to know about Gautam Adani and the stock market scam after the Hindenberg report

What you need to know about Gautam Adani and the stock market scam after the Hindenberg report
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Indian billionaire Gautam Adani, who briefly became the second richest man in the world last year, has had a difficult week. On Tuesday, he was accused of fraud and market manipulation by U.S.-based short sellers at Hindenburg Research, which caused the companies he controlled to lose tens of billions in value.

Adani’s fortune, which until recently was greater than that of Bill Gates and Warren Buffett, fell by more than $22 billion on Friday. Forbeswhich tracks the fortunes of billionaires in real time. Adani’s seven publicly traded companies, which deal in everything from energy to infrastructure, lost more than $50 billion in market value this week. Bloomberg news informed.

Hindenburg, the best a 2020 report on misrepresentations Electric vehicle firm Nikola said in a study published after a two-year investigation that Adani pulled “the biggest fraud in corporate history.”

Adani Group, the billionaire’s umbrella holding company, called Hindenburg’s accusations “baseless and discredited” and suggested that the report was malicious and intended to provoke secondary sale of shares of one of their companies.

What you need to know about the allegations against the Indian energy baron who is Asia’s richest man.

Adani, 60, had humble beginnings. Born to a textile merchant in the western state of Gujarat, Adani began his early career in a small plastics trade traveling by scooter.

His big break came after India began liberalizing its economy in the early 1990s, and he is now tasked with developing a deep-water port at Mundra. is the largest commercial port in the country. From there, his company rapidly expanded into infrastructure, logistics and energy, with coal-related businesses fueling its rise.

Indian expert James Crabtree, who wrote a book about the country’s billionaires, called Adani “modest” in 2018. Australian Financial Review article

“Both at home and abroad, he has taken a reckless approach to debt … in the process positioning him as perhaps the most fiscally aggressive of India’s newest generation of billionaires,” Crabtree wrote. unclaimed office in his own state. (Adani is also a close ally of Indian Prime Minister Narendra Modi, who previously led Gujarat.)

Adani’s net worth rose sharply from $9 billion in 2020 to $127 billion in December amid a broader boom in Indian capital markets. On Friday, Forbes reported his net worth at less than $97 billion.

How big is the Adani empire?

Very, very big. Adani’s companies operate India’s major seaports, manufacture cement and sell cooking oil. He also bought it recently New Delhi Televisiona leading English-language news channel, was one of the last networks to be considered journalistically independent.

But coal remains at the heart of his empire, and he is the world’s largest private developer of coal-fired power plants and mines, according to Global Energy Monitor. The Washington Post reported in December that more than 60 percent of his holding company’s revenue came from coal-related businesses.

His empire now spans sectors such as defence, renewable energy, transmission and infrastructure.

What is Adani’s relationship with Narendra Modi?

Adani’s dizzying rise has closely paralleled Modi’s political career. The two men first met in the 1990s in their home state of Gujarat, when Adani was an up-and-coming businessman and Modi was a promising, mid-level bureaucrat in the Bharatiya Janata Party.

Over the decades, Adani has forged ties with political leaders from across India, but associates of both men previously told The Post that the two were entangled. A former Modi adviser said the politician oversaw an infrastructure boom when he led Gujarat and came to respect Adani as a capable operator.

Politics often favors the coal billionaire and his dirty fossil fuel

After Modi was first elected prime minister in 2014, he flew from Gujarat to New Delhi in his private jet. A smiling Modi waved down the stairs, Adani’s purple logo visible on the back of the plane. (Adani said in an interview in 2016 Economic Times The newspaper reported that the plane was not being used by Modi “for free”.)

The Post reported in December that the Indian government had at least three times revised laws to help the coal business, and at least bailed it out. 1 trillion dollars. Critics such as Adani Watch, an Australian-based nonprofit, said if Hindenburg’s allegations were proven to be true, it would be “another example of what happens when crony capitalism and regime favoritism create a culture of perceived impunity.”

An Adani spokeswoman declined to address the billionaire’s political ties when fielding a list of questions ahead of The Post’s December report. An Adani employee, who spoke on condition of anonymity because he was not authorized to comment publicly, told The Post that the billionaire’s success is due to his ability to support Delhi’s economic priorities, such as developing ports to transport coal when India faces shortages and coal when the country needs electricity. construction of factories.

What are the claims of forgery made by Hindenburg?

Hindenburg published a report accusing the Adani Group of, among other things, of artificially inflating the share prices of its firms over several decades by using a network of foreign shell companies linked to Adani’s family members. Hindenburg argued that Adani’s companies were valued at more than 80 percent on the Indian stock market.

Billionaire investor Bill Ackman a tweet Thursday called the Hindenburg report “very credible” and “extremely well-researched.”

Indian markets suspended trading of some Adani subsidiaries on Friday after a big sale.

Adani said it would try to take legal action against Hindenburg and would be happy to do so challenge.

The sale threw into doubt the fate of Adani’s $2.45 billion secondary share sale that opened on Friday. One market analyst said he was watching to see if the firm would withdraw its offer or lower its asking price.

Hemindra Hazari, an independent research analyst, said the sharp fall in stock prices meant “markets are taking the content of the report seriously.”

Andy Mukherjee, an Indian economics commentator writing for Bloomberg Opinion, said the allegations call into question the integrity of India’s capital markets.

“This leaves the Indian regulator in a quandary of what to do next: Try to restore investor confidence by thoroughly investigating allegations of market manipulation, or dismiss India’s rise as the handiwork of envious foreigners?” I said in an email.

The case has also raised questions about the amounts lent to Adani by India’s public sector bank. Public sector banks hold about 30 percent of Adani Group’s debt, according to Hong Kong brokerage CLSA. The firm said the risk was manageable, despite debt at the group’s five biggest companies doubling over the past four years to $25.7 billion in March.

Gerry Shih and Anant Gupta in New Delhi contributed to this report.

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