Hindenburg Research asked 88 questions to Adani Group appears as a part of conspiracy against India

January 24, 2023

This is not merely an unwarranted attack on any specific company but a calculated attack on India, the independence, integrity and quality of Indian institutions, and the growth story and ambition of India. [ADANI RESPONSE -29/01/2023]

Adani Group  was asked to answer the following 88 questions by Hindenburg Research :

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1. Gautam Adani’s younger brother, Rajesh Adani, was accused by the Directorate of Revenue Intelligence (DRI) of playing a central role in a diamond trading import/export scheme around 2004-2005. He was subsequently arrested twice over allegations of customs tax evasion, forging import documentation and illegal coal imports. Given his history, why was he subsequently promoted to serve as Managing Director at the Adani Group?
2. Gautam Adani’s brother-in-law, Samir Vora, was accused by the DRI of being a ringleader of a diamond trading scam and of repeatedly making false statements to regulators. Given his history, why was he subsequently promoted to Executive Director of the critical Adani Australia division?
3. As part of the DRI investigation into over-invoicing of power imports, Adani claimed that Vinod Adani was “not at all having any involvement in any Adani Group of companies”, except as shareholder. Despite this claim, a pre-IPO prospectus for Adani Power from 2009 detailed that Vinod was director of at least 6 Adani Group companies. Were Adani’s original statements about Vinod, made to regulators, false?
4. What has been the full extent of Vinod Adani’s role in the Adani Group to date, including all roles on deals and entities that have transacted with the Adani Group?
5. Mauritius-based entities like APMS Investment Fund, Cresta Fund, LTS Investment Fund, Elara India Opportunities Fund, and Opal Investments collectively and almost exclusively hold shares in Adani-listed companies, totaling almost U.S. $8 billion. Given that these entities are key public shareholders in Adani, what is the original source of funds for their investments in Adani companies?
6. Recent right-to-information requests confirm that SEBI is investigating Adani’s foreign fund stock ownership. Can Adani confirm that this investigation is ongoing and provide details on the status of that investigation?
7. What information has been provided thus far as part of any investigations, and to which regulators?
8. Entities associated with Monterosa Investment Holdings collectively own at least U.S. $4.5 billion in concentrated holdings of Adani Stock. Monterosa’s CEO served as director in 3 companies alongside fugitive diamond merchant Jatin Mehta, whose son is married to Vinod Adani’s daughter. What is the full extent of the relationship between Monterosa, its funds, and the Adani family?
9. What is the extent of the Adani Group Companies, and any Vinod Adani related entities’ dealings with Jatin Mehta?
10. A once-related party entity of Adani called Gudami International, headed by close Adani associate Chang Chung-Ling, invested heavily in one of the Monterosa funds that allocated to Adani Enterprises and Adani Power. Monterosa entities continue as key Mauritius shareholders in Adani companies. What is Adani’s explanation for this large, concentrated investment into Adani listed companies by a related-party entity?
11. What was the original source of funds for each of the Monterosa funds and their investments in Adani?
12. A former trader for Elara, a firm with almost $3 billion in concentrated holdings of Adani shares, including a fund that is 99% concentrated in shares of Adani, told us that it is obvious that Adani controls the shares. He added that the structure of the funds is intentionally designed to conceal their beneficial ownership. How does Adani respond?
13. Leaked emails show that the CEO of Elara had dealings with notorious stock manipulator Dharmesh Doshi, partner of Ketan Parekh, even after Doshi became a fugitive for his alleged manipulation activity. How does Adani respond to this relationship, given that Elara is one of the largest “public” holders of shares of Adani?
14. What was the original source of funds for the Elara funds and their investments in Adani?
15. Adani has worked extensively with international incorporation firm Amicorp, which has established at least 7 of its promoter entities, at least 17 offshore shells and entities associated with Vinod Adani, and at least 3 Mauritius-based offshore shareholders of Adani stock. Amicorp played a key role in the 1MDB international fraud scandal, according to the book Billion Dollar Whale and U.S. legal case files, along with files from the Malaysian anti-corruption commission. Why has Adani continued to work closely with Amicorp despite its proximity to a major international fraud and money laundering scandal?
16. New Leaina is a Cyprus-based investment firm, which held ~95% of its holdings in shares of Adani listed companies, consisting of over U.S. $420 million. The entity is operated by Amicorp. What was the original source of funds for New Leaina and its investments in Adani?
17. Opal Investment Private Ltd. is the largest claimed independent holder of shares of Adani Power, with 4.69% of the company (representing ~19% of the float). It was formed on the same day, in the same jurisdiction (Mauritius) by the same small incorporation firm (Trustlink) as an entity associated with Vinod Adani. How does Adani explain this?
18. What was the original source of funds for Opal and its investments in Adani?
19. Trustlink’s CEO touts its close relationship with Adani. The same Trustlink CEO was previously alleged by the DRI to have been involved in a fraud using shell companies with Adani. What are the full details of Trustlink’s CEO’s dealings with the Adani Group, including those detailed in the DRI investigative records?
20. The above-named offshore entities holding concentrated positions in Adani stock accounted for up to 30%-47% of the yearly delivery volume in Adani stocks, a massive irregularity, according to our analysis of data from Indian exchanges and disclosed trading volume per Adani filings. How does Adani explain the extreme trading volume from this concentrated group of opaque offshore funds?
21. The nature of this trading suggests that these entities are involved in manipulative wash trading or other forms of manipulative trading. How does Adani respond?
22. In 2019, Adani Green Energy completed two offerings for sale (OFS) that were critical for ensuring that its public shareholders were above the 25% listing threshold requirement. What portion of these OFS deals were sold to offshore entities, including Mauritius and Cypriot entities named in our report?
23. Indian listed corporates receive a weekly shareholding update, not disclosed to the public, which would detail the shareholding changes around the deals. Will Adani detail the full list of offshore entities that participated in the OFS deals?
24. Adani chose Monarch Networth Capital to run the OFS offerings. An Adani private company has a small ownership stake in Monarch, and Gautam Adani’s brother-in-law had previously purchased an airline together with the firm. This close relationship seems to pose an obvious conflict of interest. How does Adani respond?
25. Why did Adani choose Monarch Networth Capital, a small firm previously suspended and sanctioned by SEBI over allegations of market manipulation, to run the offerings, rather than a large, well-respected broker?
26. Mr. Robbie Singh, Group CFO at the time the shareholding issue erupted in public forums in 2021, claimed in an NDTV interview on June 16^th 2021 that funds like the Mauritius shareholders had not made fresh investments and had come to own shares of other Adani stocks through vertical demergers. Our analysis shows that it was almost certain that the Mauritius shareholders made further investments in Adani Green. This coincides with the time when the promoters were required to bring their shareholding down to meet public shareholding norms. How does Adani Group respond to this new evidence?
27. Our findings indicate that SEBI has investigated and prosecuted more than 70 entities and individuals, including Adani promoters, for manipulating Adani stock between 1999 to 2005. How does Adani respond?
28. A SEBI ruling determined that Adani promoters aided and abetted Ketan Parekh in the manipulation of shares of Adani Exports (now Adani Enterprises), showing that 14 Adani private companies transferred shares to entities controlled by Parekh. How does Adani explain this coordinated, systematic stock manipulation in its shares, together with one of India’s most notorious convicted stock fraudsters?
29. In its defense, Adani Group claimed it had dealt with Parekh and his stock manipulation efforts to finance operations at the Mundra port. Does Adani view extraction of capital through stock manipulation as a legitimate method of financing?
30. Individuals close to Ketan Parekh have told us that he continues to work on transactions with his old clients, including Adani. What was and is the full extent of the relationship between Parekh and the Adani Group, including either entity’s relationship with Vinod Adani?
31. Given that Adani Group promoters pledge shares as collateral for loans, wouldn’t stock manipulation artificially inflate the collateral and borrowing base for such loans, posing a significant risk for the promoters’ counterparties and, by proxy, Adani shareholders who would suffer at the hands of a collateral call or deleveraging via equity sale?
32. In 2007, an Economic Times article described a deal whereby a brokerage controlled by Dharmesh Doshi, a fugitive associated with Ketan Parekh, bought shares in a pharmaceutical company for a BVI entity where Vinod Adani served as shareholder and director. What was and is the full extent of the relationship between Dharmesh Doshi and the Adani Group, including with Vinod Adani?
33. What is the explanation for a Vinod Adani entity receiving an alleged U.S. $1 million as part of a transaction with Jermyn Capital, the brokerage entity previously run by Dharmesh Doshi, at the time a fugitive and wanted market manipulator?
34. Investors generally prefer clean and simple corporate structures to avoid the conflicts of interest and accounting discrepancies that can lurk in sprawling, convoluted structures. Adani’s 7 key listed entities collectively have 578 subsidiaries and have engaged in a total of 6,025 separate related-party transactions in fiscal year 2022 alone, per BSE disclosures. Why has Adani chosen such a convoluted, interlinked corporate structure?
35. We found at least 38 Mauritius-based entities associated with Vinod Adani and Subir Mittra (the head of the Adani private family office). We also found Vinod Adani associated entities in other tax haven jurisdictions like Cyprus, the UAE, Singapore, and various Caribbean islands. Several of these entities have transacted with Adani entities without disclosing the related party nature of the dealings, seemingly in violation of the law, as evidenced throughout our report. What is the explanation for this?
36. How many entities is Vinod Adani associated with as either director, shareholder, or beneficial owner? What are the names and jurisdictions of these entities?
37. What are the full details of the Vinod Adani-associated entities’ dealings with private and listed entities in the Adani empire?
38. We found websites for 13 Vinod Adani entities that seem like rudimentary efforts to demonstrate that the entities have operations. Many websites were formed on the exact same day and listed the same set of nonsensical services such as “consumption abroad” and “commercial presence”. What business or operations do each of these entities actually engage in?
39. One of the websites for a Vinod Adani-associated entity claimed “we trade in Services such as sale and delivery of an intangible product, like a Service, between a producer and consumer.” What does that even mean?
40. A Vinod Adani-controlled Mauritius entity now called Krunal Trade & Investment lent INR 11.71 billion (U.S. ~$253 million) to a private Adani entity without disclosure of it being a related party loan. How does Adani explain this?
41. A Vinod Adani-controlled UAE entity called Emerging Market Investment DMCC lists no employees on LinkedIn, has no substantive online presence, has announced no clients or deals, and is based out of an apartment in the UAE. It lent U.S. $1 billion to an Adani Power subsidiary. What was the source of the Emerging Market Investment DMCC funds?
42. A Vinod Adani-controlled Cyprus entity called Vakoder Investments has no signs of employees, no substantive online presence, and no clear operations. It had an investment of U.S. ~$85 million in an Adani private entity without disclosure that it was a related party. How does Adani explain this?
43. What was the source of the Vakoder funds?
44. We have identified a series of transactions from 2013-2015 whereby assets were transferred from a subsidiary of listed Adani Enterprises to a private Singaporean entity controlled by Vinod Adani, without disclosure of the related party nature of these deals. What is the explanation for these transactions and the lack of disclosure?
45. The private Singaporean entity controlled by Vinod Adani almost immediately wrote down the value of the transferred assets. Were those still held on the books of Adani Enterprises, it likely would have resulted in an impairment and significant decline in reported net income. What is the explanation for why these assets were transferred to a private undisclosed related party before being written down?
46. We found that a “silver bar” merchant based at a residence with no website and no obvious signs of operations, run by a current and former Adani director, lent INR 15 billion (U.S. $202 million) to private Adani Infra with no disclosure of it being a related party transaction. What is the explanation for the lack of required disclosure?
47. What was the purpose of the loan, and what was the original source of the “silver bar” merchant’s funds?
48. Gardenia Trade and Investments is a Mauritius-based entity with no website, no employees on LinkedIn, no social media presence, and no apparent web presence. One of its directors is Subir Mittra, the head of the Adani private family office. The entity lent INR 51.4 billion (U.S. $692.5 million) to private Adani Infra with no disclosure of it being a related party loan. What is the explanation for the lack of required disclosure?  
49. What was the purpose of the loan, and what was the original source of the Gardenia Trade and Investments funds?
50. Milestone Tradelinks, another claimed silver and gold merchant also run by a longstanding employee of the Adani Group and a former director of Adani companies, invested INR 7.5 billion (U.S. $101 million) into Adani Infra. Once again there was no disclosure of it being a related party loan. What is the explanation for the lack of required disclosure?  
51. What was the purpose of the loan, and what was the original source of the Milestone Tradelinks funds?
52. Another secretive Mauritius entity called Growmore Trade and Investment netted an overnight U.S. ~$423 million gain through a stock merger with Adani Power. According to court records, Growmore is controlled by Chang Chung-Ling, an individual who shared a residential address with Vinod Adani and had been named in DRI fraud allegations as director of a key intermediary entity used to siphon funds out of Adani Enterprises. What is the explanation for this windfall gain to an opaque private entity controlled by a close associate of the Adani family?
53. What is the nature of Chang Chung-Ling’s relationship with the Adani Group, including his relationship with Vinod Adani?
54. Listed Adani companies have paid INR 63 billion to private contractor PMC Projects over the past 12 years to help construct major projects. A 2014 DRI investigation called PMC Projects a “dummy firm” for Adani Group. Given that constructing major projects is Adani’s business, is PMC Projects in fact just a “dummy firm”?
55. PMC Projects has no current website. Historical captures for its website show that it shared an address and phone number with an Adani company. Numerous employee LinkedIn profiles show that they work concurrently at both. Several expressed confusion at whether there was any difference. Is PMC Projects a mere “dummy firm” for Adani?
56. Newly revealed ownership records show that PMC Projects is owned by the son of Chang Chung-Ling, the close associate of Vinod Adani mentioned above. Taiwanese media reports that the son is “Adani Group’s Taiwan representative”. We found pictures of him literally holding an Adani sign at an official government event, where he represented Adani. Once again, is PMC projects a mere “dummy firm” for Adani, as earlier alleged by the government?
57. If so, why hasn’t either company reported its extensive dealings as being related party transactions, as required?
58. In FY20, AdiCorp Enterprises only generated INR 6.9 million (U.S. $97,000) in net profit. That same year, 4 Adani Group companies entities lent it U.S. ~$87.4 million, or more than 900 years of AdiCorp net income. These loans seemed to make little financial sense. What was the underwriting process and business rationale that went into making these loans?
59. AdiCorp almost immediately re-lent 98% of those loans to listed Adani Power. Was AdiCorp simply used as a conduit to surreptitiously move funds into Adani Power from other Adani Group entities and side-step related party norms?
60. Why have listed Adani companies paid private Adani entity “Adani Infrastructure Management Services” INR 21.1 billion (U.S. $260 million) over the past 5 years, given that the listed companies’ business is also managing infrastructure?
61. Listed company Adani Enterprises paid U.S. $100 million to a company, ultimately held by private trust of the Adani family in the British Virgin Islands (BVI), a notorious Caribbean tax haven, with the claimed rationale being to pay a security deposit to use an Australian coal terminal. Why did the listed company need to pay such lucrative fees to Adani’s private interests?
62. Adani Enterprises has had 5 chief financial officers over the course of 8 years, a key red flag suggesting potential accounting irregularities. Why has Adani Enterprises had such a difficult time retaining someone for its top financial position?
63. What were the reasons for the resignations or terminations each of these prior CFOs?
64. Adani Green Energy, Adani Ports and Adani Power have each had 3 CFOs over 5 years, while Adani Gas and Adani Transmission have both had CFO turnover within the past 4 years. Why have Adani entities struggled to retain individuals at its top financial positions?
65. What were the reasons for the resignations or terminations each of these prior CFOs?
66. The independent auditor for Adani Enterprises and Adani Gas is a tiny firm called Shah Dhandharia. Historical archives of its website show that it had only 4 partners and 11 employees. It seems to have no current website. Records show it pays INR 32,000 (U.S. $435 in 2021) in monthly office rent. The only other listed entity we found that it audits has a market capitalization of about INR 640 million (U.S. $7.8 million). Given the complexity of Adani’s listed companies, with hundreds of subsidiaries and thousands of interrelated dealings, why did Adani choose this tiny and virtually unknown firm instead of larger, more credible auditors?
67. The audit partner at Shah Dhandharia who signed off on Adani Gas’ annual audits was 23 years old when he began approving the audits. He had just finished university. Is that individual really in a position to scrutinize and hold to account the financials of a firm controlled by one of the world’s most powerful individuals?
68. The audit partner at Shah Dhandharia who signed off on Adani Enterprises annual audits was as young as 24 years old when he began approving the audits. Is that individual really in a position to scrutinize and hold to account the financials of a firm controlled by one of the world’s most powerful individuals?
69. The audit partners signing off on Adani Gas and Adani Enterprises annual audits are now both 28 years old. Again, are they in a position to credibly scrutinize and hold to account the financials of firms controlled by one of the world’s most powerful individuals?
70. The auditor for Adani Power, an Ernst & Young affiliate, gave a “qualified” opinion in its audit, saying that it had no way to support the value of INR 56.75 billion (U.S. ~700 million) in investments and loans held by Adani Power. What is Adani Power’s full explanation for the valuation of these investments and loans?
71. Which parts of the valuation of Adani Power’s investments and loans did the auditor disagree with?
72. Adani has been subject to numerous allegations of fraud by the DRI and other government agencies. In the 2004-2006 diamond scandal investigation, the government alleged that Adani Exports Ltd (renamed Adani Enterprises) and related entities’ exports were 3x the total exports of all the other 34 firms in the industry group put together. How does Adani explain that sudden surge in trading volume?
73. The diamond export investigation also demonstrated the role played by Vinod Adani and entities in the UAE, Singapore and Hong Kong that were used to facilitate the back-and-forth movement of money and product. How does Adani explain all the trading that took place with entities associated with Vinod Adani?
74. In 2011, the parliamentary Ombudsman for the Karnataka state issued a 466-page report describing Adani as the “anchor point” for a massive INR 600 billion (U.S. $12 billion) scam involving the illegal importation of iron ore, alleging that Adani had bribed all levels of the government in facilitation of the scheme. What is Adani’s response to the investigation and the extensive evidence presented as part of these findings?
75. In 2014, the DRI once again accused Adani of using intermediary UAE-based shell entities controlled by Vinod Adani to siphon funds, in this case through the over-invoicing of power equipment. Did Adani invoice the power equipment purchases to UAE-based entities such as Electrogen Infra FZE? If so, why?
76. Was there a markup from the original purchase price for the equipment? What services did the Vinod Adani-associated entities provide that would have justified a markup?
77. The same DRI investigation found that Vinod Adani’s intermediary entity sent ~$900 million to a privately owned Adani entity in Mauritius. What is the explanation for these transactions?
78. Where did the money from these transactions go after it was sent to a private Adani entity in Mauritius?
79. The DRI investigation also documented many other transactions through the Vinod Adani intermediary entity, which were not probed further by investigators. What is Adani’s explanation for these other transactions?
80. In yet another scandal, Adani was accused of over-valuing coal imports through shell entities in Dubai, the UAE, Singapore, and the BVI. Did Adani transact with entities in these jurisdictions? If so, which ones and why?
81. In 2019, the Singaporean entity Pan Asia Coal Trading won a coal supply tender floated by Adani Group. Pan Asia Coal Trading’s website provides no details on its coal trading experience, nor does it name a single individual associated with the company. Why did Adani Group select such a small firm for coal supply? What was the due-diligence process that went into its selection?
82. Corporate records show that a former Adani Group company director was a director and shareholder of Pan Asia. Why didn’t Adani Group disclose the potential conflict of interest in the transaction?
83. In the same year as winning the coal deal in 2019, Pan Asia Coal Trading lent U.S. $30 million to a private entity of Adani Group, per Singaporean corporate records. Why did a private company of the Adani family take money from a small single shareholder entity in Singapore at the same time its listed company was awarding a coal supply deal to it?
84. In interviews, Gautam Adani has said “I have a very open mind toward criticism.” Given this, why did Adani seek to have critical journalist Paranjoy Guha Thakutra jailed following his articles on allegations of Adani tax evasion?
85. In the same interview, Gautam Adani said “Every criticism gives me an opportunity to improve myself.” Given this, in 2021, why did Adani seek a court gag order on a YouTuber that made critical videos of Adani?
86. In the same interview, Gautam Adani said “I always introspect and try to understand the others’ point of view.” Given this, why has Adani Group filed legal suits against journalists and activists, which have been condemned by media watchdogs? Why did it have an activist in Australia followed by private investigators?
87. If Adani Group has nothing to hide, why does it feel the need to pursue legal action against even the smallest of its critics?
88. Does Adani Group truly view itself as an organization with sound corporate governance that embodies its slogan, “Growth With Goodness?”

SOURCE: Hindenburg Research Report

What Adani  Responded

Not one of these 88 questions is based on independent or journalistic fact-finding. They are simply selective regurgitations of public disclosures or rhetorical innuendos colouring rumours as fact.

While we are under no obligation whatsoever to respond to these baseless allegations made in the report, in the spirit of good governance, and transparency to our stakeholders and to avoid false market, we provide our responses to the Report as also the “88 questions” raised in the report.

There are three key themes from the Hindenburg Report:

(i) Selective and manipulative presentation of matters already in the public domain to create a false narrative.
(ii) Complete ignorance or deliberate disregard of the applicable legal and accounting standards as well as industry practice.
(iii) Contempt for the Indian institutions including the regulators and the judiciary.

Read the Adani Response Below ⇓