Why Adani Shares Are Falling In November 2023 – Forbes Advisor INDIA

The Adani Group has been in the news throughout 2023 courtesy the infamous allegations by the American short-seller group Hindenburg Research. As of Sep. 9, 2023, investing in the Adani Group shares presents both opportunities and challenges. 

While historical returns and market capitalization of the majority of the Adani Group companies are appealing, high price-to-equity (PE) ratios, intr-day volatility, and limited dividend yields may deter some investors. It’s crucial for potential investors to conduct thorough research, assess their risk tolerance, and consider their investment objectives before making decisions regarding Adani shares. 

Moreover, staying informed about the latest developments and controversies surrounding the Adani Group is essential, as these factors can significantly impact the performance of its shares. 

A Deep Dive Into the Adani Group Companies 

Here’s a comprehensive analysis aimed to provide investors and stakeholders with a balanced perspective on whether Adani shares can be a good buy in the current financial landscape. It is essential to note that financial markets are dynamic, and this assessment reflects the status quo at this specific point in time.

The below analysis is based on technical details as of Sep 9, 2023. 

Adani Green Energy – Financial Analysis

PE Ratio: Adani Green Energy exhibits a relatively high PE ratio of 113.84, suggesting that the stock is trading at a premium valuation in the market. Investors may consider this when evaluating its investment potential.

EPS (Trailing Twelve Months): The trailing twelve-month earnings per share (EPS) for Adani Green Energy is INR 8.24. This reflects the company’s earnings over the past year and is an important metric for assessing profitability.

Market Capitalization: Adani Green Energy has a significant market capitalization of INR 1,48,566 crores. This substantial market cap reflects the company’s standing as a major player in the renewable energy sector.

Price-to-Book Ratio: With a PB ratio of 21.69, Adani Green Energy’s market valuation is significantly higher than its book value. This may indicate high investor expectations for future growth.

Dividend Yield: The company doesn’t offer any dividend yield, which is not unusual for firms reinvesting profits for expansion and growth.

Volatility: Adani Green Energy has a beta of 0.96, suggesting that the stock experiences moderate volatility in line with the broader market.

52-week Range: The stock’s 52-week high and low prices are INR 2,258.80 and INR 439.10, respectively.

Performance of Adani Green Energy: In recent price returns, Adani Green Energy shows a decline of -1.01% over one day, and it has experienced a 2.43% decrease in one week. Over a one-month period, the stock has declined by -6.56%, and over the past year, it has seen a significant drop of -56.4%. However, Adani Green Energy has demonstrated impressive long-term performance with a remarkable 3-year return of 33.13% and an extraordinary 5-year return of 2286.4%. This long-term performance indicates the company’s potential for growth in the renewable energy sector.

Adani Enterprises – Financial Analysis

PE Ratio: Adani Enterprises exhibits a PE ratio of 103.79, indicating a premium valuation in the market. Investors should consider this elevated ratio when assessing the stock’s investment potential. A high PE ratio suggests that investors are willing to pay a significant premium for each unit of earnings, reflecting positive market sentiment or expectations of future growth.

EPS (Trailing Twelve Months): The trailing twelve-month earnings per share (EPS) for Adani Enterprises is INR 21.44. This metric highlights the company’s ability to generate earnings on a per-share basis over the past year. Higher EPS figures are generally considered favorable as they indicate stronger profitability.

Market Capitalization: Adani Enterprises boasts a substantial market capitalization of INR 2,53,701 crores, emphasizing its significant presence in the market. This sizable market cap underscores the company’s overall value in the stock market and its prominence as a major player.

Price-to-Book Ratio (PB Ratio): The PB ratio of 7.64 indicates that Adani Enterprises is trading at approximately 7.64 times its book value. This ratio provides insights into how the market values the company in relation to its net assets. A ratio above 1 suggests the stock is trading at a premium, potentially due to expectations of future growth.

Dividend Yield: The stock offers a dividend yield of 0.05%, providing a small return to investors in the form of dividends relative to its market price. While modest, dividend yield adds an income component for investors.

Beta: With a beta of 2.25, Adani Enterprises’ stock is more volatile than the broader market. This indicates that the stock’s price movements are approximately 2.25 times as volatile as the overall market. Investors should be mindful of this higher volatility when considering the stock.

VWAP (Volume Weighted Average Price): The Volume Weighted Average Price (VWAP) for Adani Enterprises is INR 2,206.04. VWAP is a key metric for assessing the average traded price, weighted by the trading volume, offering insights into the average price level at which the stock has traded.

52-Week High/Low: The stock’s 52-week high and low prices are INR 4,190.00 and INR 1,017.45, respectively. This range provides a glimpse into the stock’s price volatility over the past year.

Performance of Adani Enterprises: Adani Enterprises’ share price exhibits a mix of short-term fluctuations and impressive long-term growth. With a 2.3% increase over one day and a moderate 0.75% gain over a week, the stock shows recent positive momentum. However, a one-month decline of -3.6% suggests some volatility in the short term. Over three years, Adani Enterprises has demonstrated robust growth, with a remarkable return of 446.53%, and over five years, an exceptional return of 1304.07%. These figures highlight the importance of considering both short-term dynamics and the stock’s historical performance for a comprehensive evaluation of Adani Enterprises as an investment option.

Adani Ports & Special Economic Zone (SEZ) – Financial Analysis:

PE Ratio: Adani Ports & Special Economic Zone (SEZ) presents a PE ratio of 27.12, indicating a moderate valuation in the market. Investors may find this PE ratio attractive as it suggests a reasonable pricing relative to the company’s earnings. The moderate PE ratio may reflect a balanced market perception of the company’s growth prospects.

EPS (Trailing Twelve Months): The trailing twelve-month earnings per share (EPS) for Adani Ports & SEZ is INR 29.34, highlighting the company’s ability to generate substantial earnings on a per-share basis over the past year. A higher EPS is generally considered favorable, indicating stronger profitability.

Market Capitalization: Adani Ports & SEZ boasts a significant market capitalization of INR 1,71,849 crores, securing its position as a leader in the market. This sizable market cap underscores the company’s overall value and importance in the stock market.

Price-to-Book Ratio (PB Ratio): With a PB ratio of 3.89, Adani Ports & SEZ is trading at approximately 3.89 times its book value. This ratio provides insights into how the market values the company in relation to its net assets. A ratio below 5 suggests a relatively reasonable valuation.

Dividend Yield: The stock offers a dividend yield of 0.63%, providing a small but tangible return to investors in the form of dividends relative to its market price. Dividend yield adds an income component for investors.

Beta: With a beta of 1.46, Adani Ports & SEZ’s stock is moderately more volatile than the broader market. This indicates that the stock’s price movements are influenced by market trends, economic conditions, and industry-specific factors.

VWAP (Volume Weighted Average Price): The Volume Weighted Average Price (VWAP) for Adani Ports & SEZ is INR 790.29, representing the average traded price weighted by the trading volume. This metric is useful for assessing the average price level at which the stock has traded.

52-Week High/Low: The stock’s 52-week high and low prices are INR 912.00 and INR 395.10, respectively. This range provides insights into the stock’s price volatility over the past year.

Performance of Adani Ports & Special Economic Zone (SEZ): Adani Ports and Special Economic Zone (SEZ) has displayed a mix of short-term fluctuations and consistent long-term growth in its share price returns. Over one day, the stock saw a marginal increase of 0.3%, while a slight decline of -1.79% occurred over one week. The one-month and three-month periods show positive returns of 3.12% and -3.26%, respectively, indicating some volatility. Despite these short-term variations, Adani Ports SEZ has demonstrated substantial long-term growth with returns of 102.82% over three years and an impressive 116.09% over five years, underscoring its potential as a stable and rewarding investment option over the years.

Adani Power – Financial Analysis:

PE Ratio: Adani Power exhibits a PE ratio of 7.44, indicating a relatively low valuation in the market. This could be appealing to value-oriented investors as the stock is priced at a lower multiple of its earnings. A lower PE ratio may suggest that the market has not priced in significant future growth expectations.

EPS (Trailing Twelve Months): The trailing twelve-month earnings per share (EPS) for Adani Power is INR 53.42, reflecting the company’s ability to generate substantial earnings on a per-share basis over the past year. A higher EPS is generally considered favorable, indicating stronger profitability.

Market Capitalization: Adani Power holds a market capitalization of INR 1,53,197 crores, underscoring its significant presence in the market. This sizable market cap reflects the company’s overall value and importance in the stock market.

Price-to-Book Ratio (PB Ratio): With a PB ratio of 4.87, Adani Power is trading at approximately 4.87 times its book value. This ratio provides insights into how the market values the company in relation to its net assets. A ratio below 5 suggests a relatively reasonable valuation.

Dividend Yield:The stock does not offer any dividend yield, which is not unusual for companies reinvesting profits for expansion and growth. While dividend yield can be an attractive feature for income-focused investors, growth-oriented companies often prioritize reinvesting profits for future development.

Beta: With a beta of 1.76, Adani Power’s stock is relatively more volatile than the broader market. This indicates that the stock’s price movements are influenced by market trends, economic conditions, and industry-specific factors.

VWAP (Volume Weighted Average Price): The Volume Weighted Average Price (VWAP) for Adani Power is INR 392.02, representing the average traded price weighted by the trading volume. This metric is useful for assessing the average price level at which the stock has traded.

52-Week High/Low: The stock’s 52-week high and low prices are INR 409.70 and INR 132.40, respectively. This range provides insights into the stock’s price volatility over the past year.

Performance of Adani Power: Adani Power has exhibited robust share price returns across various timeframes, showcasing its strong performance in the market. Over one day, the stock surged by 4.06%, indicating a significant short-term gain. The positive momentum continued over one week with a 2.56% increase. The stock demonstrated impressive growth over one month, recording a substantial gain of 25.52%, suggesting favorable market sentiment and potential catalysts. The three-month and one-year returns further support the stock’s upward trajectory, standing at 20.8% and 22.23%, respectively. Adani Power’s stellar long-term performance is evident in its three-year return of 926.36% and an exceptional five-year return of 735.33%, showcasing its position as a standout player in the market with the potential for sustained growth.

Adani Total Gas – Financial Analysis:

PE Ratio: Adani Total Gas exhibits a PE ratio of 103.42, indicating a relatively high valuation in the market. This suggests that investors are willing to pay a premium for each unit of earnings generated by the company. A high PE ratio may reflect positive market sentiment, growth expectations, or industry trends.

EPS (Trailing Twelve Months): The trailing twelve-month earnings per share (EPS) for Adani Total Gas is INR 5.19, reflecting the company’s earnings over the past year. A higher EPS is generally considered favorable, indicating stronger profitability on a per-share basis.

Market Capitalization: Adani Total Gas has a market capitalization of INR 59,054.30 crores, indicating its significance in the market. This substantial market cap reflects the collective value of all the company’s publicly traded shares.

Price-to-Book Ratio (PB Ratio): With a PB ratio of 23.80, Adani Total Gas is trading at approximately 23.80 times its book value. This ratio provides insights into how the market values the company in relation to its net assets. A ratio above 5 may suggest a relatively high valuation.

Dividend Yield: The stock offers a dividend yield of 0.05%, providing a small return to investors in the form of dividends relative to its market price. Dividend yield adds an income component for investors.

Beta: With a beta of 1.06, Adani Total Gas’s stock is relatively in line with the broader market in terms of volatility. This indicates that the stock’s price movements are comparable to market trends and economic conditions.

VWAP (Volume Weighted Average Price): The Volume Weighted Average Price (VWAP) for Adani Total Gas is INR 536.67, representing the average traded price weighted by the trading volume. This metric is useful for assessing the average price level at which the stock has traded.

52-Week High/Low: The stock’s 52-week high and low prices are INR 4,000.00 and INR 522.00, respectively. This range provides insights into the stock’s price volatility over the past year.

Performance of Adani Total Gas: Adani Gas has experienced mixed share price returns across different timeframes, indicating fluctuations in its market performance. Over one day, the stock showed a modest increase of 1.19%, suggesting short-term positive momentum. However, the one-week and one-month returns of 0.54% and -6.32%, respectively, reflect some volatility and potential challenges in the stock’s recent performance. Over three months, Adani Gas faced a decline of -18.88%, which may be indicative of broader market trends or company-specific factors impacting its short to medium-term outlook. The one-year return of -85.61% raises concerns, indicating a substantial decrease in value over the past year. On a positive note, Adani Gas has demonstrated resilience in the long-term with a three-year return of 58.51% and an impressive five-year return of 381.35%, suggesting potential for recovery and growth over an extended period. Investors should consider both short-term fluctuations and long-term trends when evaluating Adani Gas as an investment opportunity.

Adani Wilmar Share – Financial Analysis

PE Ratio: Adani Wilmar presents a substantial PE ratio of 316.58, suggesting that the stock is trading at a premium valuation in the market. Investors should carefully consider this metric when evaluating the investment potential of Adani Wilmar.

EPS (Trailing Twelve Months): The trailing twelve-month earnings per share (EPS) for Adani Wilmar is reported at INR 1.00. This metric reflects the company’s earnings over the past year and is crucial for assessing its profitability.

Market Capitalization: Adani Wilmar holds a market capitalization of INR 41,193.31 crores, indicating its notable presence in the market. Investors may consider this substantial market cap when evaluating the company’s standing.

Price-to-Book Ratio: The Price-to-Book ratio (PB Ratio) for Adani Wilmar is 5.61, suggesting that the market valuation is significantly higher than its book value. This may indicate high investor expectations for future growth.

Dividend Yield: Adani Wilmar doesn’t offer any dividend yield, which is not unusual for firms reinvesting profits for expansion and growth.

52-week Range: The stock’s 52-week high and low prices are reported as INR 668.40 and INR 293.00, respectively. Investors may consider these price levels when assessing the stock’s performance.

Performance of Adani Wilmar Share: Adani Wilmar has exhibited mixed share price returns across various timeframes, reflecting a combination of short-term fluctuations and longer-term trends. Over one day, the stock showed a modest increase of 0.49%, indicating some positive momentum in the short term. The one-week return of 7.44% suggests a more substantial positive movement, possibly influenced by recent market developments or company-specific news. However, the one-month return of -2.54% and the three-month return of -15.62% indicate a decline in value over these periods, signaling potential challenges or market corrections. The one-year return of -49.89% highlights a significant decrease in share price over the past year, which may warrant further investigation into the factors contributing to this decline. Investors should consider both short-term fluctuations and longer-term trends when evaluating Adani Wilmar as an investment, taking into account the specific dynamics of the industry and company.

Adani Energy Solutions – Financial Analysis

PE Ratio: Adani Energy Solutions displays a PE ratio of 61.84, indicating a moderate valuation in the market. Investors may consider this metric when evaluating the stock’s attractiveness for investment.

EPS (Trailing Twelve Months): The trailing twelve-month earnings per share (EPS) for Adani Energy Solutions is reported at INR 11.79. This metric provides insights into the company’s recent profitability, contributing to the overall assessment of its financial health.

Market Capitalization: Adani Energy Solutions commands a substantial market capitalization of INR 81,330.57 crores, underscoring its significant presence in the market and potentially indicating investor confidence in the company’s prospects.

Price-to-Book Ratio: The PB ratio stands at 7.40, suggesting that the market values Adani Energy Solutions at a premium compared to its book value. This could be indicative of high investor expectations for future growth.

Dividend Yield: The company does not offer any dividend yield, a characteristic often observed in firms focused on reinvesting profits for expansion and growth rather than distributing dividends to shareholders.

Volatility: Adani Energy Solutions has a beta of 1.62, indicating that the stock experiences moderate volatility relative to the broader market. Investors should consider their risk tolerance when evaluating stocks with higher beta values.

52-week Range: The stock’s 52-week high and low prices are INR 3,285.00 and INR 631.50, respectively. This range provides context for understanding the stock’s recent price movements and potential volatility.

Performance of Adani Energy Solutions: Adani Transmission has demonstrated varied share price returns across different timeframes. In the short term, the stock experienced a modest increase of 0.83% over one day, indicating some positive momentum. However, the one-week return of -1.63% and the one-month return of -0.91% suggest a slight decline in value, potentially influenced by recent market conditions or company-specific factors. Over three months, the stock showed a more substantial decrease with a return of -18.55%, signaling a challenging period for investors. The one-year return of -73.88% reflects a significant decline in share price over the past year, indicating potential concerns or adverse market conditions. On a positive note, the three-year return of 91.74% and the five-year return of 210.06% highlight the stock’s strong performance over the longer term. Investors should carefully assess both short-term fluctuations and long-term trends when evaluating Adani Transmission for investment, considering factors impacting the company’s growth and market dynamics.

ACC (Associated Cement Companies) – Financial Analysis

PE Ratio: ACC currently holds a PE ratio of 28.42, suggesting a moderate valuation in the market. Investors may find this metric useful in assessing the stock’s price relative to its trailing twelve months (TTM) earnings per share.

EPS (Trailing Twelve Months): The trailing twelve-month earnings per share (EPS) for ACC is reported at INR 64.05. This figure provides insights into the company’s recent profitability and serves as a key indicator for evaluating its financial performance.

Market Capitalization: ACC boasts a market capitalization of INR 34,186.67 crores, signifying its substantial presence in the market. The market cap is an important metric that investors consider when assessing a company’s overall size and significance.

Price-to-Book Ratio: With a PB ratio of 2.69, ACC’s market valuation, in relation to its book value, suggests a moderate premium. This ratio can indicate investor expectations for future growth.

Dividend Yield: ACC offers a dividend yield of 0.51%, providing investors with a measure of the dividend income in relation to its stock price. A yield above zero indicates the company’s willingness to distribute profits to shareholders.

Volatility: ACC has a beta of 1.05, indicating that the stock’s price is moderately correlated with the broader market. Investors should consider their risk tolerance when assessing stocks with varying beta values.

52-week Range: The stock’s 52-week high and low prices are INR 2,675.00 and INR 1,592.35, respectively. This range provides context for understanding the stock’s recent price movements and potential volatility.

Performance of ACC: ACC’s share price returns show a mixed performance over various timeframes. In the short term, the stock had a marginal increase of 0.04% over one day, indicating relatively stable market conditions. However, the one-week return of -1.5% and the one-month return of -4.05% suggest a slight decline in value, potentially influenced by recent market trends or company-specific factors. Over three months, the stock experienced a more substantial decrease with a return of -8.53%, indicating a challenging period for investors. The one-year return of -26.04% reflects a significant decline in share price over the past year, which may be attributed to various factors affecting the company or industry. On a positive note, the three-year return of 7.3% and the five-year return of 24.99% highlight the stock’s overall resilience and positive performance over the longer term. Investors should carefully consider both short-term fluctuations and long-term trends when evaluating ACC for investment, taking into account factors influencing the company’s growth and market dynamics.

Analysis: Why Adani Companies Shares Can Be a Good Buy

Historical Returns: Several Adani companies have showcased exceptional historical returns, with some experiencing over 1,000% growth over the past five years. These returns may attract investors seeking significant capital appreciation.

Market Capitalization: Adani Enterprises and Adani Green Energy both boast substantial market capitalizations, indicating their strong positions in their respective sectors. This could instill confidence in investors regarding the companies’ stability.

Diversification: The Adani Group comprises diverse companies spanning various sectors, potentially offering investors the opportunity to diversify their portfolios within a single conglomerate.

Moderate Dividend Yields: Some Adani companies offer dividend yields, albeit modest. For income-focused investors, even a minimal yield can contribute to overall returns.

PE Ratios: Adani companies, while some exhibit high PE ratios, may attract growth investors willing to pay a premium for stocks with promising growth prospects.

Beta Values: Companies like Adani Green Energy and Adani Total Gas have lower beta values, suggesting relatively lower volatility compared to the broader market. This can be appealing to risk-averse investors.

Analysis: Why Adani Shares May Not Be a Good Buy

High PE Ratios: Many Adani companies exhibit elevated PE ratios, signifying a premium valuation. This may deter value investors looking for stocks with lower valuations.

Volatility: Several Adani companies have high beta values, indicating significant volatility. Investors with a low risk tolerance may be cautious about such stocks.

Lack of Dividend Yield: Most Adani companies offer minimal or no dividend yields. This could discourage income-oriented investors seeking regular income from their investments.

Mixed Short-Term Performance: Some Adani stocks have shown mixed short-term performance, with fluctuations over one-month periods. Short-term traders may find this volatility challenging.

Market Sentiment: Adani Group has faced controversies and regulatory scrutiny, which can influence market sentiment. Negative news or developments may impact stock prices adversely.

PE Ratio Discrepancies: Adani Wilmar’s exceptionally high PE ratio compared to its sector may raise questions about its valuation.

Controversies Surrounding Adani Group: A Comprehensive Overview

The Adani Group, a conglomerate with interests in various industries, has found itself embroiled in a series of controversies and issues, spanning coal mining in Australia, allegations of cronyism, financial leverage concerns, stock market rigging, tax evasion accusations, stock manipulation, and even Wikipedia manipulation. Here’s a detailed examination of these controversies and their implications.

Coal Mining in Australia: Carmichael Coal Mine Project

In 2014, Adani launched a monumental mining and rail project known as the Carmichael coal mine in Queensland’s Galilee Basin, Australia. This venture came with a staggering price tag of $21.5 billion, spanning a project life of 60 years. With an annual capacity of 10 million tonnes of thermal coal, this project aimed to tap into Queensland’s vast coal reserves.

Despite its ambition, the Carmichael project faced numerous hurdles. Activist pressure led to several international banks refusing to finance it, pushing Adani to announce in November 2018 that the project would be entirely self-financed. Despite this challenge, Adani secured final approvals from the Australian government in July 2019, signaling the commencement of mine construction.

One notable controversy emerged in 2015 when the then-head of Adani’s Australian mining division, Jeyakumar Janakaraj, faced scrutiny due to his association with a mining pollution incident in Zambia. Prior to his role with Adani, Janakaraj served as the operations director at Konkola Copper Mines in 2010, which faced legal charges regarding hazardous wastewater discharge into the Kafue River. The Australian government characterized Adani’s omission of Janakaraj’s involvement in the African pollution incident as a “mistake.” Legal consequences were not pursued despite potential violations of Australia’s Environmental Protection and Biodiversity Conservation Act 1999.

The Australian government has also faced legal challenges from environmental groups, including the Australian Conservation Foundation, regarding the Carmichael mine’s impact on groundwater and water resources, resulting in cases brought to the Federal Court.

In 2020, Adani Mining underwent a name change, becoming Bravus Mining and Resources, reflecting the evolving nature of the project.

As of December 2021, Bravus announced the successful assembly of the first shipment of high-quality coal from the Carmichael mine, ready for export via the North Queensland Export Terminal.

Cronyism Allegations: Gautam Adani and Political Ties

Gautam Adani, the Chairman and Managing Director of the Adani Group, has faced allegations of close ties to prominent Indian politicians, including former Chief Minister of Gujarat and Indian Prime Minister Narendra Modi and his political party, the Bharatiya Janata Party (BJP). These relationships have raised concerns about potential cronyism, particularly as Adani’s firms have been awarded numerous government contracts in the energy and infrastructure sectors.

In 2012, an Indian government auditor accused Modi’s administration of providing low-cost fuel from a Gujarat state-run gas company to the Adani Group and other companies, intensifying allegations of favoritism.

Moreover, the Modi government made a contentious exception to its energy policy, allowing Adani Enterprises Limited to mine a coal block holding over 450 million tonnes of coal within one of India’s densest forest regions.

Both the Adani Group and Modi’s government have consistently denied allegations of cronyism, but these claims continue to fuel public debate.

Financial Leverage Concerns: Overwhelming Corporate Debt

As of 2022, the Adani Group faced substantial financial challenges, particularly concerning corporate debt. The conglomerate’s total corporate debt had reached a staggering $30 billion. This situation raised concerns about the group’s cash flow and credit metrics, prompting credit rating agencies and analysts to issue warnings.

In August 2022, CreditSights, a unit of Fitch Ratings, sounded the alarm about Adani’s aggressive expansion strategies, highlighting the potential for a “worst-case scenario” leading to a debt trap and potential default. Although Adani engaged in discussions with CreditSights to mitigate these concerns, the fundamental issue of overleveraging remained.

The CreditSights report drew significant attention for its dire assessment, even after Adani’s outreach, underscoring the need for a thorough financial reassessment.

Stock Market Rigging: SEBI’s Action Against Manipulation

In 2007, the Securities and Exchange Board of India (SEBI) took action against multiple Adani companies, prohibiting them from engaging in the purchase or sale of securities for two years. This drastic measure was a response to their involvement in a stock market manipulation scheme that took place between 1999 and 2001. The scheme aimed to artificially influence stock prices and was executed through entities overseen by Ketan Parekh, the primary accused in India’s largest stock market scandal.

After paying a fine of $140,000, the Adani companies eventually resumed their trading activities. This episode left a lasting mark on the group’s reputation.

Tax Evasion Allegations: Complex Financial Trails

On February 27, 2010, the Central Bureau of Investigation (CBI) arrested Rajesh Adani, the managing director of Adani Enterprises Ltd., on charges of custom duty evasion totaling INR  80 lakh.

In August 2017, Indian customs authorities alleged that the Adani Group was diverting millions of funds from the company’s books to tax havens controlled by the Adani family overseas. The scheme purportedly involved the use of a Dubai shell company to siphon off funds. The Guardian published details of a $235 million diversion, further highlighting the complex financial practices of the group.

An investigation by the Directorate of Revenue Intelligence in 2014 uncovered a convoluted money trail from India through South Korea and Dubai, ultimately leading to an offshore company in Mauritius, allegedly owned by Vinod Shantilal Adani, Gautam Adani’s older brother. These revelations deepened suspicions of tax evasion and financial irregularities within the Adani Group.

Stock Manipulation and Accounting Fraud Allegations (2023): Hindenburg’s Report

In January 2023, Hindenburg Research released the findings of a two-year investigation, leveling damning allegations of market manipulation and accounting malpractices against Adani. The report accused Adani of orchestrating “the largest con in corporate history” and perpetrating a “brazen stock manipulation and accounting fraud scheme” spanning decades.

Hindenburg’s report disclosed that it held short positions on Adani Group companies, triggering a seismic response in financial markets. Bonds and shares of Adani-affiliated firms plummeted, resulting in a market value loss exceeding $104 billion, equivalent to nearly half of the group’s total value.

Adani’s response came in the form of a comprehensive 413-page document, condemning Hindenburg’s conduct as “calculated securities fraud” and characterizing the report as a “calculated attack on India” that threatened the nation’s integrity and growth ambitions. Hindenburg countered that Adani’s response sidestepped the core issues raised in the initial report, accusing Adani of using nationalism as a shield.

Cancelation of the FPO

The fallout from these revelations was extensive. Adani canceled its planned $2.5 billion follow-on public offer (FPO) due to market volatility and announced the return of FPO funds to investors. The Reserve Bank of India initiated inquiries into banks’ exposure to Adani firms, while Citigroup and Credit Suisse ceased accepting Adani Group bonds as collateral. S&P Dow Jones Indices removed Adani Enterprises from its sustainability index. Norway’s Oil Fund divested its entire stake in Adani shares.

Adani’s attempts to take legal action against Hindenburg Research prompted further debates on the veracity of the allegations.

Additional Developments and Investigations (2023): Regulatory Scrutiny Continues

In a surprising turn of events, a group of truckers in Himachal Pradesh celebrated the Hindenburg report, which they viewed as instrumental in their battle against Adani’s decision to close two cement plants due to a dispute over freight rates. The report played a pivotal role in mobilizing truckers and garnering political support for their cause.

A March 2023 report disclosed that an entity related to the Adani Group had financially supported a company that violated sanctions imposed by the United Nations Security Council (UNSC) on trade with North Korea. This revelation further intensified the scrutiny on the group’s financial dealings.

India’s markets regulator, the SEBI, confirmed in February 2023 that it was investigating allegations made by Hindenburg Research against companies owned by Gautam Adani, signaling ongoing regulatory action.

Judicial Proceedings (Date Wise):

On March 2, 2023, the Supreme Court of India established a six-member committee to probe issues surrounding the Adani Group’s stock market crash following the Hindenburg report. However, as of May 19, the committee expressed its inability to conclude definitively, citing insufficient information from SEBI. The Supreme Court granted a three-month extension for SEBI to complete its investigation by August 14, 2023.

On June 24, 2023, Adani Group’s share value experienced a significant decline after reports surfaced that the United States Department of Justice and U.S. Securities and Exchange Commission were investigating the company’s communications with U.S.-based investors, prompted by a short seller’s report.

On August 31, 2023, the Organized Crime and Corruption Reporting Project presented allegations suggesting that substantial funds, totaling hundreds of millions of dollars, had flowed into publicly traded Adani Group stocks. These investments purportedly transpired through investment funds located in Mauritius, characterized by a lack of transparency. These funds were allegedly connected to partners associated with the Adani promoter family, and the report implied significant financial gains from these covert transactions.

Bottom Line

Anyone looking to invest in the Adani Group must carefully evaluate the pros and cons before parking their money. All investment decisions must be taken after thorough analysis of the stock market and the trends that determine stock moves.