Bloomberg Businessweek (February 13, 2023)
Год выпуска: February 13, 2023
Автор: Bloomberg Businessweek USA
Издательство: «Bloomberg Businessweek Europe»
Формат: PDF (журнал на английском языке)
Количество страниц: 60
The billionaire symbol of India’s growth is a lot less rich after a short seller’s attack
An hour past sunrise in India on Feb. 2, the billionaire Gautam Adani appeared in a video posted online to reassure his investors: Everything will be fine.
For days the shares of companies in his mighty Adani Group conglomerate had been in a tailspin. The selloff was triggered by a damning report published by a US activist short seller-an investor that bets on the prices of assets falling, then tries to make that happen by taking its case to the public. Hindenburg Research accused Adani of running nothing less than “the largest con in corporate history,” with a barrage of allegations about artificially inflated share prices and accounting games. Adani Group issued a strong denial, but investors weren’t waiting to decide who was right. In just a week, the total market value of a group of Adani-related companies, in industries including energy and construction, had fallen more than $90 billion.
“Dear friends,” Adani began his statement. Then he confirmed some bad news from the night before: Because of the steep drop in its share price, his flagship company, Adani Enterprises Ltd., would cancel its recent public sale of new shares. It was an implicit but stunning admission of the colossal damage to his business. But, Adani said, surely his investors wouldn’t waver in their support.
The short speech had a solemn air that reflected sudden uncertainty over not only Adani Group but also India’s aspirations for fast growth and global economic power. Here was an ultrawealthy businessman with deep ties to the country’s political elite, and somehow he couldn’t contain the damage from a volley by a tiny New York firm cheekily named for an exploded airship. As he often does, Adani ended his video with “Jai Hind,” a phrase favored by politicians that translates to “Victory to India.”
His words weren’t enough. When the markets opened that morning in Mumbai, shares in Adani companies plunged again. By sunset, his personal losses since the short report totaled $58 billion-almost half his fortune. He was no longer Asia’s, or even India’s, wealthiest man.
The situation has laid bare a sometimes vast gap between India’s corporate world and the financial centers in London and New York. When the short seller’s report was released on Jan. 24, few in India expected any lasting impact. Some of the allegations echoed familiar misgivings: People in financial circles had long whispered about Adani Group’s befuddling financials, and a handful of journalists in India had written about curious dealings inside the conglomerate, with little to show for it besides rebuttals from the group. But Hindenburg’s report resonated, perhaps because of the short seller’s success raising questions about Nikola Corp., a US electric-truck maker whose founder was convicted of fraud last year.
The 100-page document makes many allegations, but the key ones are that people close to Adani have used a network of obscure, offshore shell companies to buy and sell shares in his businesses and pump up their prices or to inject them with funds so they would seem more creditworthy. By making the businesses appear more valuable, Hindenburg argues, Adani Group could attract more investment or take out more loans collateralized by stock. The report notes that when it was published, Hindenburg had short positions on Adani Group’s US-traded bonds and on non-Indian-traded derivatives and stood to make money if investors fled Adani.
Adani Group’s rebuttal says the report is full of stale and baseless accusations by a short seller looking to make a “wrongful gain.” Not to be outdone on sheer length, the response, with appendixes, ran more than 400 pages. “We accept criticism,” Jugeshinder Singh, the group’s chief financial officer, told Business Today TV. “But we cannot accept lies.”
The total loss for Adani companies stood at $109 billion by Feb. 8; their value was about $236 billion before Hindenburg. “This is now affecting the stability of our markets, our reputation, our financial institutions and, most importantly, our retail investors,” Mahua Moitra, a lawmaker, wrote to India’s main securities regulator after Hindenburg’s report was published, demanding it investigate Adani Group. “I hope this is dealt with expeditiously.”
It’s hard to overstate the story’s impact in India. That’s because unlike some of Hindenburg’s recent targets-hyped-up electric vehicle makers, gambling apps and a business targeting Mormons that Hindenburg says may be a Ponzi scheme-Gautam Adani’s empire is an industrial behemoth...
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