5-Months of Hindenburg Report: Adani says confident of governance, disclosure standards

Hindenburg Research on January 24 accused Adani of “brazen stock manipulation and accounting fraud” as well as using a “labyrinthian network” of shell companies for surreptitious money movements, allegations that the conglomerate has strongly denied, calling the report “a calculated attack on India”.
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Five months after a bombshell short seller report lopped off billions of dollars in market value of his empire, Gautam Adani has reiterated that his ports-to-energy conglomerate remains confident in its governance and disclosure standards.

In the annual report of group’s flagship firm Adani Enterprises Ltd, the Adani Group chairman said a Supreme Court-appointed panel of experts found no regulatory failure.

Hindenburg Research on January 24 accused Adani of “brazen stock manipulation and accounting fraud” as well as using a “labyrinthian network” of shell companies for surreptitious money movements, allegations that the conglomerate has strongly denied, calling the report “a calculated attack on India”.

In the annual report, Mr. Adani, 61, said the US-based short seller published the report “on the event of our Republic Day”.

The report lopped off close to $150 billion in market value of the group’s list companies at the lowest point and led to Mr. Adani losing the richest Indian tag.

“The report was a combination of targeted misinformation and outdated, discredited allegations aimed at damaging our reputation and generating profits through a deliberate drive-down of our stock prices,” he said.

The short-selling incident resulted in “several adverse consequences”, he said. “Even though we promptly issued a comprehensive rebuttal, various vested interests tried to opportunistically exploit the claims made by the short seller. These entities engaged and encouraged false narratives across various news and social media platforms.” He then went to refer to the expert committee constituted by the Supreme Court to look into the matter.

“It (the committee) comprised individuals known for their independence and integrity,” he said. “The Expert Committee did not find any regulatory failure. The Committee’s Report not only observed that the mitigating measures, undertaken by your company helped rebuild confidence but also cited that there were credible charges of concerted destabilization of the Indian markets.” The panel, he said, also confirmed the quality of the group’s disclosures and ‘found no instance of regulatory failure or any breach.”

“While the (capital market regulator) SEBI is still to submit its report (on a separate probe into the allegations against Adani group) in the months ahead, we remain confident of our governance and disclosure standards,” he added.

His group in a late evening statement on Monday, stated that it was not aware of any subpoena to the US investors by American authorities post Hindenburg allegations. “All of our disclosures are a matter of public record,” the firm said. “It is routine that various regulators will seek access to public material in an easy and referenceable manner.”

It reiterated that “Adani Portfolio companies and its businesses have acted as per the regulations and accounting standards of the jurisdictions in which they operate.”

The Supreme Court-appointed expert committee states that “Adani Group has taken mitigation measures such as paring down debt, fresh infusion, which led to increase in investor confidence.” the statement said adding SEBI was examining certain aspects and their queries are being responded by Adani portfolio entities.

“We request to avoid needless speculation at this time and wait for SEBI and the Supreme Court to complete their work and submit their findings,” it said.

Mr. Adani, the statement said, operates a robust corporate governance framework and is strongly committed to following all applicable laws and regulations.

“Four of our portfolio companies AGEL, ATL, APSEZ and AEL issue global capital market paper with only APSEZ being a corporate issuer. AGEL has one instrument issued on corporate basis. All of the other issue’s are restricted group issuances,” it said. “Most of the bond issuance by Adani Portfolio Companies are under the Regulation S and 144A and Regulation D. Almost all the bonds (non Regulation D) are listed on SGX and / or India INX.”

These bonds have been raised under the ECB guidelines of Reserve Bank of India, in the form of Non-Convertible Debentures and are subject to stringent extant ECB guidelines and regulation of the central bank, it said adding the offering circulars for these bonds contain full and complete disclosures.

“Further, post-issuance disclosures/filings are made, as per applicable relevant regulatory requirements, in a timely manner, consistent with the covenant package,” it added.