THE HIDDEN BERG IN HINDENBURG
Hummock and Bummock
‘A system is broken when corporate behemoths like Adani Group seem able run an intricate fraud in broad daylight and when ordinary citizens are terrified to speak out against those who use their power and wealth to suppress criticism.’
Hindenburg draws data mostly from disclosed, published reports and articles in the public domain and web pages, info that is readily accessible. More ominous are the half opened windows embedded in the report that tempt the reader to make informed divinations.
In past 3 years ,it claims, Adani group companies moved not by leaps and bounds but leaps and leaps and leaps - the share valuation of its seven listed companies cumulatively rose by 819 % . Adani Enterprises share skyrocketed by 1398% , and Adani Total Gas by 2121% . While ‘plodders’, the work horses in the industry group of Adani Enterprises, managed to get their shares valued at 12 times the earning, Adani’s share got valued at 578 times. So with Adani Total Gas - industry average valuation was 20 times earnings, Adani’s was 881 times. Obviously, investors see more hidden value in a Group in which four of its 7 listed companies have negative free cash flows and reel under severe liquidity crunches. Current Ratio, a measure of liquidity, of Adani Enterprises is 0.7, of Adani Total Gas 0.2 , much below the red flag limit of 1.
Indubitably, Adani’s is a stellar phenomenon. Not a shooting star that incinerates itself but a comet that suddenly comes hurtling out of the wilderness of space. then swirls out of view, only to reappear with a greener head and more brilliantly swishing tails. Sadly a comet has always been thought to be a purveyer of doom and gloom.
Adanis have outlived many stock burnouts. Like a comet every time that it has sparkled it has left behind a trail of gloom. Adani Exports ( before rechristening as Adani Enterprises) stock price in 6 weeks of Nov-Dec 1999 rose from 495 to 1300 before reverting to lower levels, from May to July 2000 the stock again jumped from 570 to 1111 then gasped. In late 2003, in mere 19 trading days it scaled Himalayan heights soaring 128%. When charged by SEBI for aiding and abetting Ketan Parekh in synchronised trades to create fake demand and fake volume Adani Exports pleaded all innocence. It was only raising finance for its newly acquired Mundra port project. Again in 2022 it rose 109% before crashing yet again.
Adani's mettle has thus been tempered in the furnace of financial boom and bust. He has risen like a phoenix , floundered just as quickly but only to rebound soon. Such resilience has been deemed virtuous and amply rewarded. Holders of all entities and resources that he covets magically melt away or suddenly lose interest to carry on. All he needs is to put his padlocks and signboard and walk away in glee.
Shiv Khera, the inspirational guru, said ‘ Winners don’t do different things , they do things differently’. And winners, precocious and endowed like Adani do it extra quick. Hindenburg signposts how differently Adani blazed a blinding trail in his fabulously meteoric rise from 609th richest man in 2014 to 3rd richest in Dec 2022. He collapsed what would normally take a lifetime to achieve to mere 8 years.
Hindenburg revelations script a sordid saga of share price manipulation through round tripping , circuitous trading , and offshore shell companies in tax havens that hold only Adani Group shares and do not disclose the names of its beneficial owners . The Group operates through a bewildering labyrinth of entities. Its seven listed companies have a whopping 578 subsidiaries. It stonewalls or stalls all attempts to pierce the veil of opacity surrounding its operations. Pokey, too inquisitive journos have been browbeaten, bullied, harassed by filing libel suits in remote Gujarat courts.
The report also carries a list of DRI ,SEBI investigations into alleged financial wrongdoings whose outcomes remain enveloped in obscurity. Instances of siphoning funds from listed companies to Adani owned private entities and suspect money laundering transactions are cited.
Callous and pathetic disregard for corporate governance is hinted at. There is a high turnover of top executives- five CEOs in eight years for Adani Enterprises, Raw and callow independent auditors ,still in their 20s , certify books of this global behemoth. False disclosures and non disclosure of related party transactions also figures in.
And much more . It makes for a sorry reading . All of it has been refuted by Gautam Adani. Unfortunately there is more rhetoric in it than unfolding of truth.
It is imperative that state agencies winnow facts from fiction in the Report not merely to punish any wrong doing and to unearth any facilitating official nexus but also to reassure the nation that in the aftermath of Adani Enterprises FOI fiasco no systemic failure looms.
Post 2008 sub prime meltdown, too big to fail prescriptions give only cold comfort.
