5 Things You Should Know About the Adani-Hindenburg Scandal

The Adani Group has emerged as one of the largest companies in the world in the last few years. Hindenburg came out with their research paper on Adani Group, in which they accused them of stock manipulation, unfair debt practices, and money laundering.
It caused a furor in the economic circle. With blames flying both ways, it is important that we get to know the facts of the case before we form an opinion. The Adani Group has also come out in the open, accusing the Hindenburg group of maligning their name to gain benefit by shorting their stock.

1. Adani’s valuations have tanked
   Ever since the research paper came out, the valuation of Adani has been taken for a ride. Both parties continue to slug it out in an attempt to come out on top. Gautam Adani has lost billions of dollars from his personal wealth and has dropped down significantly in the list of the world’s richest.
   It seems to have affected his popularity at home too. People are calling for Adani to be looked at with a finer lens. If there are allegations of wrongdoings against him, then those allegations should be investigated.
2. Looming regulatory authorities
   Wherever money is involved, public money loaned from banks, the entity is accountable to the people. This means that Adani is under the radar of investigative authorities looking closely at his companies’ books.
   Suppose any wrongdoings are found in the way Adani has procured the money. In that case, his company will be held accountable. The repercussions can involve anything from a severe fine to the cancellation of his license. Adani might even be tried legally, as financial fraud is a punishable crime in India. If proven guilty, Adani will join an already long list of financial fraudsters in India.
3. Adani continues to grow
   It is interesting to note that despite all the troubles he is going through, he is still growing. Every week, he signs new deals with companies that add value back to his company. It is important to note that the net worth of the world’s richest individuals depends on the share valuations of their companies.
   Adani is poised to grow. He might have fallen to the 17th position on the list, but he is well on his way back to the top. Adani has his fingers into many pies, and even the full might of Hindenburg cannot stop him. His influence and his partnerships mean that if he bleeds, so do the hundreds of companies that work with him.
4. Adani Enterprises’ FPO was called off
   As Adani continued to lose value, their ambitious plan for their FPO had to be dialed down. The valuation has declined too. They took a 6% hit on their initial value. Before the Hindenburg report, this was touted as one of the biggest FPO ever coming to the market. Then, it collapsed like a house of cards.
   Calling off the FPO is a big dent for any company. The annual operating plans, the long-term goals, the credit they can raise – all these are based on the amount of money they can raise through these tools they have. And Hindenburg coming along with their paper was an outcome the Adani Group could have never accounted for.
5. The company’s rating is stable for now
   Companies need to borrow money all the time. It is how they raise capital to meet their expansion and operational needs. The banks that loan them money are just like individual clients. Clients who need to have a background check and maintain a credit score.
   The rating for these companies (from S&P, Moody’s, etc.) is their financial score. They lose this credibility; they lose the ability to raise money effectively. The loans and advances will get costlier, and the interest rates will climb. Thus, it is of great importance for companies to maintain their ratings. Adani is in the clear for now, but if things continue to get worse, they might not all be ok.

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