Hindenburg vs Adani Group : When a David Fights a Goliath

Hindenburg vs Adani Group

Whistleblowing (verb) : the act of raising an alarm against a company or an organization’s unethical or illegal practices.

At a glance , the word mentioned above seems like a noble , philanthropic move by a 3rd party to maintain a degree of righteousness in the market – however as vigilantism often gives rise to more crimes in general – when whistleblowers seem to have an ulterior motive – it’s rarely something that’s totally selfless – because in the corporate jungle , everything comes with a price – with a tag , or some consequences. Generally done by someone inside a company(eg. Twitter CSO Pete Madge Zatko’s subpoena against bot usage) – often 3rd party organizations decide to join the party as well ( Edward Snowden’s Wikileaks ).

No wonder the biz world was shook when Hindenburg – an NPE which specializes in short selling raised some serious allegations against Adani Group of companies. Someone was finally taking potshots against once the second richest man on the planet – and the whole world was instantly hooked to the beef that ensued.

What is Short Selling?

Short selling is basically the practice of betting against stocks in order to garner and generate revenue in the process. Suppose there is a stock with a market price of 100 rupees. A short seller buys the share at the market price and , resells it to the friendly neighborhood broker. And as the market slumps with stock price say 80 , they buy it back and sell it again – earning a decent 20 percent profit. This practice is not uncommon , but however what makes Hindenburg different is the fact that it releases a detailed analysis of what the reasons behind betting against the stock is – as it expects others to join the bandwagon and further beat down the stock prices , thereby letting it earn more revenue from the future transactions.

Adani Group is not the first one to be attacked by Hindenburg , its previous targets include some big names like Eros International, Nikola etc. The alleged involvement of Eros being run by the son in law of the CEO of Eros – sparked controversies so much that Eros lost almost 90% of its revenue in a single fiscal year and has been recuperating ever since.
Although summing up the entire 357 page legal documents is seemingly possible – there are 5 main causes that are of key significance.

The DRI Probe and Ethical Malpractice

One of the main allegations that Hindenburg had on the tycoon was that the Board of Directors of the Adani Group had run ins with the law and still held powerful posts in the multimillion dollar empire. Chief among them is Mr. Samir Vora – brother in law of Gautam Adani – previously accused of Diamond Trading Scam by DRI ( Directorate of Revenue Intelligence ). However , the response from the Adanis were swift and crisp – citing that CESTAT – a higher authority gave Mr. Vora a cleanchit – and this is nothing but an attempt of defamation by Hindenburg driven by profit.

Family comes First?

The involvement of Vinod Adani – the brother of Gautam Adani – in buying large amount of shares raised concerns about insider trading and artificially inflating and manipulating the price of stocks – was another serious allegation against the corporate scions. The trade relations with Mauritius and other offshore companies that Adani had tieups against were largely private – and transparency issues were the cornerstone of Hindenburg’s Attack.

The response by Adani group was direct and passive aggressive as well : “ Mr.Vinod Adani has no managerial roles nor does he occupy a chair in the top level management of the company. What he does with his stock portfolio is impertinent with the group and we expect Hindenburg to maintain a corporate decorum , by not targeting individuals with the Adani name, rather focus on the organization.”

Adicorp Involvement

Adicorp – an organization owned by someone very close to Adani was involved in some high value loans with the group , but almost immediately returning almost 90% of the purse. This raised an alarm about funneling and routing funds and shelling.

Shelling : The practice of opening pseudo companies to funnel and pilfer , manipulate and aberrate funds. Cayman Island Companies, Panama Papers Scandal are some prior examples of shelling.

This is probably the only curveball that dumbfounded the Adani legal team as there has been no specific response to the problem.

Auditing Transparency and Corporate Complicacy

What Hindenburg saw as a potential red flag was the audit issue. The group had almost 750+ subsidiaries making the operational structure and management of finance extremely complicated. Tracking a particular line of transaction becomes increasingly difficult – and the fact that this corporate megalodon is audited solely by Shah Dhandharia –a firm with only 4 partners and 11 employees made Hindenburg go on the offensive by saying this is a strategy by the group to mask their shady dealings. The changing of CFOs at a blistering pace – Adani Group has had 8 CFOs in past 5 years was also a red flag.

Adanis retorted by citing that their auditors were more than competent enough – and it regularly gets audited by big 4s – KPMG, Deloitte, EY and PwC.

Intolerance to Criticism 

Intolerance to criticism has been somewhat hypocritical to Gautam Adani’s stance in which he claims that he is open to constructive criticism – but his prior legal warfares against media , journalists and even ex business partners have earnt him the reputation of a headstrong , opinionated guy. Accusing the big shot of intolerance and hypocrisy – Hindenburg really went all personal with it.

Mr. Adani was quoted saying : “ Being open to introspection or understanding others point of view does not mean we have given up our legal right to defend ourselves, our businesses and other employees through proper legal channels. We have exercised our rights in this matter in due compliance with law and through proper judicial processes in this respect.”


Although the accusations are serious , the Adani group has till now done a fantastic job of defending its position as Hindenburg is still to produce any sort of substantial evidence – rather nudging on the emotions and morality of the people. Although there might be some twists and turns in the seemingly long drawn legal battle to follow – maybe this time , just MAYBE , Hindenburg has bitten more than he can chew.

The Hindenburg Vs. Adani Skirmish Rages On

If you’ve ever seen a chess match ongoing – both the players are seen pondering over their next moves for hours as high stakes are involved – and one rash move can change the outcome.Now imagine , a chess match with Billions of dollars at stake , the brand value and corporate goodwill of a multibillion dollar empire on the line – the match becomes even more tense and nerve wracking. Such has been the case about the Hindenburg Research vs Adani Group – that has been all the news recently.

Except the fact – that it was lightning fast – almost like blitz chess. Nathan Anderson , known for his fast and accurate investigative probes and logically sound deductions raised some serious allegations – which although the Adani Legal team defended successfully initially , the impregnable defence soon began to crumble under pressure.

FPO : Follow on Public Offer

FPO is the practice by which a company can issue new shares in order to either expand it’s investor base , shareholder base and mstly increase it’s revenue. Although a common practice , this has always been effective – given the fact that the reputation of the company shows indication of future growth.

After the company’s stock price crashed 28% yesterday , billionaire Gautam Adani-led Adani Enterprises Limited called off its Rs 20,000 crore follow-on public offer (FPO) and said money will be returned to investors.The decision to not proceed with the FPO despite full subscription was taken at a meeting of the board of directors of the company.

“Given the unprecedented situation and the current market volatility the – insulation to the investors are of paramount importance to us. “ – the once richest Indian, and once the second richest man on the planet was quoted saying. Although this was largely projected on behalf of the company as a gesture of concern about customers – experts view it as a last ditch effort to restore its clean image once more – given the amount of tarnishing it has gone through.

Such was the impact of this Adani vs Hindenburg fiasco – that even on budget day yesterday – in what was termed as one of the most investor friendly budget in the recent year – the market index swayed by nearly 1000 points indicating the delirium in the market.

Credit Suisse cuts its ties :

The wealth management arm of the Adani Group has always been Credit Suisse – a bank that has been the guaranter on its loans , managing its assets and largely looking over potential mergers , acquisitions and takeovers of the diverse portfolio the Indian based tycoon has. However , as the Adani stocks and net worth tanked , they decided to cut off all ties with the group – thereby clearly expressing a lack of trust although implicitly.

Adani’s Say On The FPO cancellation

The ever charismatic , ever confident CEO however – seems pretty optimistic about his company’s position : “Our balance sheet is very healthy with strong cashflows and secure assets, and we have an impeccable track record of servicing our debt. This decision will not have any impact on our existing operations and future plans. We will continue to focus on long term value creation and growth will be managed by internal accruals. Once the market stabilizes, we will review our capital market strategy,” the 60-year-old Adani said.

Adani Group Bit More Than It Could Chew

Mauled by bear attacks from foreign and domestic critics alike and stuck in a no holds barred legal battle between the short seller Hindenburg Group – whose campaign made the Adani Emire topple from its very foundation. Marred by allegations on grave issues like funneling of money , speculations of insider trading – the company had been forced to go into defensive – from losing its financial wealth management tieup with CreditSuisse to stop rolling off new FPO – the latest nail in the coffin is that Hindenburgh gave Adani a reality check when vision of the Adani Group changed from global expansion as a conglomerate to conserve cash and salvage its reputation again.


The wounds on the Adani Group do not look great to be honest. The growth rate percentage is honestly sad , for a company like Adani which have always been aggressive in it’s growth strategy. This year – the targeted growth dropped from 40% to merely 15-20% – akmost halved in single blow.

The absence of Mr. Gautam Adani from UP investor summit also spoke volumes. A state with whom his conglomerate share an industrial and commercial alliance like no other. There’s one unwritten rule – if a state lets you in to conduct business – you always attend the “parties” they throw – people call these parties – “ TradeExpo”s. Adani not attending only highlights the seriousness of the situation for Adani. It not only wiped out over $120 billion in market cap, but also badly dented the group’s ability to raise money. That it is expecting revenue growth to halve could mean that several projects that were expected to go on stream this year might be stalled.

Whether the David kills Goliath once and for all is still a topic up for debate and in all due honesty , still seems a bit farfetched – but as of now the outcome is pretty much clear.

Nate Anderson 1 – 0 Gautam Adani.


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