Our Reply To Adani: Fraud Cannot Be

Obfuscated By Nationalism Or A Bloated

Response That Ignores Every Key
Allegation We Raised
Published on January 29, 2023

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On January 24th, we released a report (https://hindenburgresearch.com/adani/) outlining

numerous issues of suspected fraud at the Adani Group, the 2nd largest conglomerate in
India run by the world’s then-third richest man.

Hours ago, Adani released a ‘413-page response’. It opened with the sensationalistic claim
that we are the “Madoffs of Manhattan”. [1]

Adani also claimed we have committed a “flagrant breach of applicable securities and
foreign exchange laws.” Despite Adani’s failure to identify any such laws, this is another
serious accusation that we categorically deny.

It also predictably tried to lead the focus away from substantive issues and instead stoked a
nationalist narrative, claiming our report amounted to a “calculated attack on India.” In
short, the Adani Group has attempted to conflate its meteoric rise and the wealth of its
Chairman, Gautam Adani, with the success of India itself.

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We disagree. To be clear, we believe India is a vibrant democracy and an emerging
superpower with an exciting future. We also believe India’s future is being held back by the
Adani Group, which has draped itself in the Indian flag while systematically looting the
nation.

We also believe that fraud is fraud, even when it’s perpetrated by one of the wealthiest
individuals in the world.

In terms of substance, Adani’s ‘413 page’ response only included about 30 pages focused on
issues related to our report.

The remainder of the response consisted of 330 pages of court records, along with 53 pages
of high-level financials, general information, and details on irrelevant corporate initiatives,
such as how it encourages female entrepreneurship and the production of safe vegetables.

(Source: Page 24 of Adani’s response, before addressing our questions, which describes its
initiative to produce safe to eat vegetables)

Adani Failed To Specifically Answer 62 of Our 88

Questions

Of The Questions It Did Answer, The Group Largely

Confirmed Or Attempted to Sidestep Our Findings

Our report asked 88 specific questions of the Adani Group. In its response, Adani failed to
specifically answer 62 of them. Instead, it mainly grouped questions together in categories
and provided generalized deflections.

In other instances, Adani simply pointed to its own filings and declared the questions or
relevant matters settled, again failing to substantively address the issues raised.
Of the few questions it did answer, its responses largely confirmed our findings, as we
detail.

But before we get into those, we note that the core allegations of our report – focused on
numerous suspect transactions with offshore entities – were left completely unaddressed.

Our Report Alleged That Adani Group Has Engaged In

Billions of U.S. Dollars In Suspicious Dealings With Its
Chairman’s Brother, Vinod Adani, And His Labyrinth of
Offshore Shell Entities

These Dealings Raised Serious Questions About Stock

And Accounting Manipulation

Adani’s Defense: Vinod Adani, Brother To The Chairman,

Is Not A Related Party To The Group And There Are No
Disclosable Conflicts Relating To This Web Of Opaque
Transactions

Our report (https://hindenburgresearch.com/?p=2376) detailed a vast labyrinth of offshore

shell entities directed by or associated with Vinod Adani, the older brother of Chairman
Gautam Adani. These entities included 38 entities in Mauritius, along with others in the UAE,
Cyprus, Singapore, and various Caribbean islands.

We presented extensive evidence that these entities have been used for (1) stock parking /
stock manipulation (2) or engineering Adani’s accounting.

Many of our questions were focused on both the nature of these transactions and the lack
of disclosure around the clear conflicts of interest involved.

In its response, Adani did not seem to dispute the existence of these transactions and made
no effort to explain their obvious irregularities.

Instead, Adani bizarrely argued that Vinod Adani is not a related party to the Adani Group, and
that there are no disclosable conflicts relating to the transactions that have collectively
moved billions of U.S. dollars through Adani Group entities, largely through offshore shell
entities.
We Asked About The Source of The Billions Of U.S.
Dollars That Have Flowed From Vinod Adani-Associated
Offshore Shell Entities Through The Adani Group

Adani’s Defense: “We Are Neither Aware Nor Required To

Be Aware Of Their ‘Source Of Funds’”

Example #1: A U.S. ~$253 Million Loan From a Mauritius

Entity Where Vinod Adani Serves As a Director

Example #2: An Investment Of U.S. $692.5 Million From A

Mauritius Entity Controlled By The Head Of The Adani
Group’s Private Family Investment Office

Beyond the requirements to disclose related party dealings, many of our questions focused
on the source of funds for suspect transactions between Adani Group entities and Vinod
Adani-associated entities. This information is critical to the integrity of Adani’s business, as it
indicates whether the company is round-tripping turnover, laundering illicit funds, or using
cash to manipulate its stock.

We found Adani’s lack of direct and transparent answers to these questions telling.

For example, we asked a series of questions about transactions emanating from entities
where Vinod Adani or the head of the Adani Group Family Investment Office served as
directors.

Adani’s response claimed ignorance, stating “We are neither aware nor required to be aware
of their ‘source of funds’” [Pg. 35]. It also added that it is “not in a position to comment on…
allegations on the business dealings and transactions of Mr. Vinod Adani.” [Pg. 41]

In other words, we are expected to believe that Gautam Adani has no idea why his brother
Vinod lent massive sums of money to Adani entities, and no idea where the money
originated from.

If any of that were true, Gautam could easily clear up the mystery by calling his brother, or
asking him at the next family dinner, why he has been directing billions of dollars to Adani-
controlled entities through a network of opaque offshore shell entities. He could also call
the head of his own Family Investment Office and ask the same.

Once again, these explanations simply defy common sense.

Our Report Outlined Numerous Irregularities And
Connections Between Suspected Offshore Stock Parking
Entities And Adani Promoters, Raising Key Questions
About Whether Promoter Holdings Were Fully Disclosed

Adani’s Response Claimed It Simply Doesn’t Know Who

Its Largest Public Holders Are

A large portion of our report was dedicated to outlining a web of opaque offshore entities,
often with connections to Vinod Adani, that seemed to hold nothing but billions of U.S.
dollars worth of stock in Adani listed companies. 

As a reminder, here are several examples of suspect Mauritius-based entities with large,
concentrated holdings in Adani stock:

(Source: *Disclosures as per Trendlyne, BSE : 1 (https://trendlyne.com/portfolio/superstar-

shareholders/53827/latest/apms-investment-fund-ltd/), 2
(https://trendlyne.com/portfolio/superstar-shareholders/53858/latest/cresta-fund-ltd/), 3
(https://trendlyne.com/portfolio/superstar-shareholders/53953/latest/lts-investment-fund-
ltd/), 4 (https://trendlyne.com/portfolio/superstar-shareholders/53876/latest/elara-india-
opportunities-fund-limited/), 5
(https://www.bseindia.com/corporates/shpPublicShareholder.aspx?
scripcd=533096&qtrid=116.00&QtrName=December%202022), **No other holding visible in
listed equities)

In one example, we showed how an entity that had been an Adani related party made a
major investment into one of the suspect offshore holders, drawing a clear line between the
Adani Group and the suspected stock parking entities.

We also showed how several of the suspected stock parking entities had been formed with
the help of Amicorp, which was involved in one of the most notorious international fraud
and money laundering scandals in history, the 1MDB scandal.
Specifically, regarding the company’s use of Amicorp, which formed at least 7 Adani
promoter entities, at least 17 offshore shells and entities associated with Vinod Adani, and
at least 3 Mauritius-based offshore shareholders of Adani stock, Adani said it was “not
concerned” about the company’s previous scandals, like the 1MDB fraud.

Further, we showed that the suspected stock parking entities engaged in wildly irregular
trading, accounting for up to 30%-47% of delivery volume, essentially cornering the market
in Adani shares.

In its response, Adani once again claimed complete ignorance as to its largest public holders
and their trading patterns:

“Each of the entities referenced in queries above are public shareholders in the
listed companies in the Adani Portfolio…we cannot comment on trading pattern or
behavior of public shareholders.” [Pg. 47-48]

On Adani’s Legal Technicality Defense: It Strikes Us As

Obvious That Vinod Adani Is A Related Party To The
Adani Group

Adani focuses its argument on contesting the legal definition of ‘related party’ in India,
claiming:

“Any mere close or business relationship of any promoter entity or their relatives
does not make a transaction a related party transaction.” [Pg. 32]

Indian Accounting Standards (https://www.mca.gov.in/Ministry/pdf/INDAS24.pdf#page=3)

specifically explain how the brother of an individual “may be expected to influence, or be
influenced by” the individual for purposes of determining related party transactions.
 (Source: The Indian Ministry of Corporate Affairs [Pg. 3
(https://www.mca.gov.in/Ministry/pdf/INDAS24.pdf#page=3)])

By comparison, the Financial Accounting Standards Board (FASB) – recognizing the dangers
of related party transactions for investors – simply says that “[m]anagement of the entity
and members of their immediate families” are related parties.

We believe investors should regard Vinod Adani as a related party under either
definition based on his (i) familial relationship with the Chairman and much of the senior
management of the Adani Group (ii) his suspected significant undisclosed ownership of
shares in Adani Group companies; (iii) his historical presence on the board of various Adani
Group companies; and (iv) his extensive and irregular transactions with Adani.

In short, these transactions bear all the same potential risks and issues of any other related
party transaction: non-arms-length transactions, corruption, conflicts of interest, stock
manipulation and fraud – yet Adani claims investors are not entitled to know.

Of The Questions Adani Answered, They Largely

Confirmed Our Findings, Argued Points We Didn’t Raise
Or Sidestepped The Key Issues Altogether

Here we list several examples of responses that simply failed to address the questions we
asked.

1. Our report included documentation from a 2007 SEBI ruling declaring that Adani
promoters had aided and abetted infamous market manipulator Ketan Parekh in his
manipulation of shares of AEL, the predecessor entity to Adani Enterprises. Per the SEBI
ruling:

“The charges leveled against promoters of Adani that they aided and abetted Ketan
Parekh entities in manipulating the scrip of Adani stand proved”. [Pg. 4
(https://www.sebi.gov.in/enforcement/orders/may-2007/order-in-the-matter-of-
adani-exports-ltd_9286.html)] [Pg. 46
(https://www.sebi.gov.in/enforcement/orders/may-2007/order-in-the-matter-of-
adani-exports-ltd_9286.html)]

We specifically asked, “How does Adani explain this coordinated, systematic stock
manipulation in its shares, together with one of India’s most notorious convicted stock
fraudsters?”

Adani responded by simply declaring the question to be “incorrect” without explanation,

adding that the matter had earlier been settled.

2. Our report included evidence showing that SEBI investigated and prosecuted more than
70 entities and individuals, including Adani promoters, for manipulating Adani stock
between 1999 to 2005. We asked for an explanation as to why Adani’s listed companies so
regularly seem to be the subject of market manipulation investigations and prosecutions.

Adani’s response once again claimed it was not “aware of, nor are we required to be, aware
of any proceedings against these other ‘entities and individuals’”. [Pg. 29]

We find it hard to fathom that Adani is completely unaware of the repeated allegations and
prosecutions associated with the manipulation of its stock. This is especially the case
considering the irregular and outsized performance of its listed companies relative to
benchmarks and peers.

3. Our report included a question relating to Adani’s statement to regulators, claiming that
Vinod Adani was (emphasis added) “not at all having any involvement in any Adani Group of
companies”.

The question, which parallels issues that continue to this day, centered around whether the
Adani Group had been forthright to the government about its dealings with Vinod Adani.

Adani’s response seemed to indirectly confirm that its statements to regulators were in fact
false, adding qualifying language claiming that Vinod was not involved in “relevant” entities
associated with the investigation, as opposed to the “any” it had claimed when asked by
regulators (emphasis added):

“…the over-invoicing allegations for power imports pertains to the period between
April 2010 till August 2014, during which period Mr. Vinod Adani was not even a
director in any of the relevant Adani entities against whom such investigations
were initiated”. [Pg. 29]

In reality, Vinod Adani was a director of Adani Group companies. Vinod Adani stepped down
from Adani Global Pte in August 2010, Adani Shipping in April 2011 and Adani Power Pte in
April 2011, according to Singaporean Corporate Filings. [Pg. 2, Pg. 3
(https://www.slideshare.net/secret/KMwhgNqRARNZyh)] This was during the period under
investigation.

In short, it seems the Adani Group flagrantly misled government officials on one of the most
important issues our report raised: its relationship with Vinod Adani.

4. We noted that listed Adani companies have paid INR 63 billion to private contractor PMC
Projects over the past 12 years. We noted that the entity is controlled by the son of a close
associate of Vinod Adani. We included Taiwanese media reports showing that the same
individual controlling the entity 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.

Despite the controller of PMC projects clearly being an Adani representative, we found no
related party disclosures about the massive payments to PMC Projects, which siphoned
cash out of listed companies.

Adani simply didn’t respond to these questions, instead referring to documents from an
earlier DRI investigation.

5. Our report showed that Mauritius shareholders had effectively bailed out Adani Green
Energy and helped it avoid delisting by participating in 2 offer for sale (OFS) deals. We had
asked Adani Group to detail the entities involved in these transactions by providing data
from its weekly shareholding patterns. These patterns are available (although not publicly
disclosed) for many corporates in India.

Rather than address this request, Adani simply regurgitated our analysis which indicates
that offshore suspected stock parking entities did in fact participate in the deals.
This reinforces what we viewed as an almost statistical certainty: that the suspected stock
parking entities participated in the deal and helped Adani Green avert a likely delisting.

We also note that the recent Follow On Public Offer (FPO) in Adani Enterprises contains
many of the same type of Mauritius funds that we pointed out as likely being in clear
violation of SEBI regulations.

For example, the anchor list of Adani Enterprises investors contains a host of suspect
Mauritius funds. These include: (1) Ayushmat Limited (2) Coeus Global Opportunities Fund
(3) Great International Tusker Fund and (4) Aviator Global Investment.

6. The Adani Group has not even attempted to clarify its relationship with a Chinese
National (Chang Chung-Ling), despite a plethora of linkages. We had asked: What is the
nature of Chang Chung-Ling’s relationship with the Adani Group, including his relationship
with Vinod Adani?

This is an important matter, not only for shareholders but also India’s national
interest because:

1. An entity (Gudami International) run by Chang Chung Ling (aka Lingo Chang) was said
to have been part of a massive corruption scheme in the AgustaWestland Scandal
(https://economictimes.indiatimes.com/articleshow/53834584.cms?
utm_source=facebook.com&utm_medium=referral&utm_campaign=ETFBMain&fbclid=
IwAR3JXPoZ7ANQzcqEqRJPYXK7m8Bzqa7UHuvei7CuFu2XdyJyGJZVF5GSmHA), one of
India’s largest and ongoing bribery scandals.
2. The son of Chang Chung Ling is the beneficial owner of the major contractor to the
Adani Group called PMC Projects, mentioned above.

(Note: We will continue to update this list of issues over the course of the next several days
as we scrutinize Adani’s response closer and continue our ongoing due diligence on the
company.)
Conclusion: Adani’s Response Largely
Confirmed Our Findings And Ignored Our
Key Questions
Disclosure: We Are Short Adani Group Through U.S.-
Traded Bonds And Non-Indian-Traded Derivative
Instruments

Legal Disclaimer

We hold short positions in Adani Group Companies through U.S.-traded bonds and non-Indian-
traded derivatives, along with other non-Indian-traded reference securities. This report relates
solely to the valuation of securities traded outside of India. This report does not constitute a
recommendation on securities. This report represents our opinion and investigative commentary
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[1] Adani seems unaware that Madoff lived in Manhattan, so he was quite literally his own
Madoff of Manhattan.

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