Have you ever played Jenga?

If yes, then you must know how one tiny mistake can
make the building fall.

Something similar happened when Hindenburg wrote a report on Adani enterprises

fundamentals as well as alleged stock market manipulation

Lot of back and forth between Hindenburg and Adani over the past week already
happened

On Monday 4 of Adani stocks hit the lower circuit

Other stocks aren't faring well either - Adani gas lost steam as it fell 40% (but
there is more)

Adani group called this a calculated attack on India as all has been proven in
court

Hindenburg stands by its report, saying fraud can be done even by the richest

It took a while to make this episode, as the allegations were serious...

Didn't want the video to be one sided so we waited for Adani's reply to Hindenburg

We did a biographical episode on Adani but YouTube put a strike on the video saying
it had profanities

We make it a rule never to swear, and that too on Adani? I couldn't face the
repercussions - I wonder how YouTube came to that decision

While I can't tell the future, I recommend you watch that video before it may be
taken down

This particular episode, with help from Manjul, too all our weekend

We have compiled info on both the sides for you

Whoever is right - I can't get my head around Adani's claim of Hindenburg's

calculated attack on India

Thousands of companies flourish in our country and questions on Adani were raised
even before (like on The morning context)

Fitch group also said Adani companies were overleveraged

Adani should not hide behind nation and sue Hindenburg instead, or buyout

But nationalism cannot become a cover for a politician or a businessman

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On 24 January, Naatu Naatu's Oscar nomination filled ourselves with pride ... at
the same time, a report by Hindenburg (that employs 5 people) attacked Adani's
reputation

This small-time company caused a loss of $70 billion

Banks that banked on Adani and especially LIC stock also took the hit

$72 billion dollars vanished how quickly while Adani slipped in the Richest list -
from 3rd to 8th

Short seller research company Hindenburg is behind all this - their target was
specifically Adani group - check their headline

How the world’s 3rd richest man is pulling the largest con in corporate history -
how much of that is true?

But first, what is short selling?

Usually, you make a profit on a stock when its price goes up

In short selling, you predict the downfall of a stock and make profit when its
price slips

Harshad bhai also gave an example of this

That's what Hindenburg research company does. They analyze something fishy in a
company and make it public, taking a position against the company to earn profits

But short selling is a legal activity and in fact companies like Hindenburg keep a
track of the stock market

Otherwise this is the job of market regulator

In 1937, Hindenburg was among the largest airships in the world - it was like
Titanic in the sky - the future of air travel

However, an unfortunate disaster on the airship caused many fatalities and in 40

seconds airships became a meagre part of the aviation history

In 2017, Nathan Anderson founded Hindenburg Research to find fishy companies,

release a report after thorough research and Hindenburg effect on the stock market

One thing to clarify is that Hindenburg does this for their own profit

Like with a company called Nikola - Hindenburg claimed wrongful activities on part
of company founder, including fraud and manipulation

After this research, the share price of Nikola fell from $60-65 range to $2.5

By short selling, Hindenburg Research made quite a lot of money and this is what
they do. However in the US they are not termed anti-national or anything - in fact
they are held in high regard

Hindenburg Research pointed out issues with Adani group of companies

The list of allegations is long, but let us go through some headlines, to make up
our mind

Hindenburg Research found a meteoric $100 billion rise in stock price in 3 years -
that amounts to avg hike of 820% (btw what was your avg hike?)

Sensex as an index grew 50% - what exceptional did Adani companies do in the
pandemic that skyrocketed their growth?

8 of 22 key members in Adani group are family members

The problem is not nepotism. Hindenburg Research has said the family is controlling
the stock, from different entities

Money laundering investigations are ongoing and the allegation is establishing

shell companies in Mauritius, Cayman Islands

Younger brother Rajesh Adani was involved and arrested in a diamond trading fraud
by directorate of revenue intelligence (he is now the MD of Adani group)

Hindenburg identified 38 shell entities, with no business setup or operations, in

Mauritius investing billions of dollars and controlled by elder brother Vinod Adani

Hindenburg says this is a violation, while Adani group says those are independent
companies

Then where did investment money come from? Hindenburg asked

A 2007 SEBI ruling stated that charges against Adani in manipulating scrip of Adani
stand proved - this matter was solved in court, replied Adani group

Independent auditor called Shah Dhandharia is a tiny firm that does not even have
their own website

An auditor checks for accounting frauds but the auditor itself is questionable as
there are no details - Adani replied that the auditors may be young but they are
more than qualified

Adani group of companies is heavily leveraged and they pledged their company shares

First, company built on loan and value risen on loan, then again a loan on the
shares - this is a debt fueled growth in which liabilities are more than assets

Present loan is 2 lakh crore of which 80,000 crore from Indian banks - fall of
Adani group can also dent banking stocks

Adani said that their profitable businesses are ensuring debt burden is reduced

Main allegation is of stock price manipulation. Stock price is automatically

dependent on demand and supply - when former is more, price is more - and vice
versa

What if the supply is physically controlled? Free float in the market is very less
as over 73% is with the promoters that is Adani (maximum permissible is 75%)

Remaining 27% - but what if you take away another 15%?

Hindenburg says that this is being controlled indirectly by the family

Big investors like LIC are invested in much of the remaining 10% - for regular
traders 3-5% is available

It is possible to manipulate price when supply is controlled

For comparison, Yes Bank has 4 crore shares in open market whereas Adani has only 4
lakh

This is why there may not be a total collapse as shares are limited - who will sell
- big investor like LIC or promoters?

This can work as a damage control

Adani group has said the report is bogus and they are planning legal action on
Hindenburg, a short selling company

If we discard the Hindenburg report

We throw their claims into the dustbin - still Adani has to answer key questions

What is the relationship b/w LIC and Adani? LIC is practically run by Govt and 98%
of investment into Adani from insurance sector is from LIC

LIC has manifolded their investment in Adani group - from 7,300 crore to 72,000
crore (this is public money)

Whereas the mutual fund industry largely stays away from Adani group - then why is
LIC firm - what is the source of their confidence or is there more to it?

Coming on to conspiracy - if it is so then why has Hindenburg not gone after Tata,
Birla, Infosys or Wipro?

These companies also created wealth for so many - are so old yet no question by
Hindenburg - why is everyone after Adani?

How come a single report from a small time research company shatter such a large
group as Adani? How can it be a conspiracy against the country? Is India so weak or
something is fishy with Adani?

Let us know in the comments

Has nothing changed since 1992 - is stock manipulation still easy?

What was SEBI or RBI doing all this time? How can there be loan against the stock -
that may be overvalued to begin with? How will banks recover money if it defaults?

And what of the common retail investors?

Adani enterprises is listed on BSE and NSE, in good books of govt, handle huge
projects, promoter was 3rd richest a while back - is that not enough to trust the
company?

If they have managed to deceive everyone then how can retail investors ever trust
another company? SEBI will look into the Hindenburg report

Have right to ask questions, LIC to talk to Adani - and that's good, because at the
end of it the common man has to pay

Our life insurance can be at risk if LIC suffers

Adani wrote reply, saying Hindenburg cannot understand Indian market - building
subsidiaries is common practice, for example

Market is struggling and Hindenburg says that Adani's over-400 pages reply lacks
facts

Adani group has not clarified relationship with a Chinese national Chang Chung Ling
and also relationship with brother Vinod Adani

No doubt, this is the biggest test for Adani group in a long while and it remains
to be seen what happens to Adani stocks
We can hope the group to accept any mistake and be more transparent

Our country needs 100 Adanis - legal, transparent and non-manipulative

If as a result of Hindenburg report transparency is increased then that's welcome -

otherwise legal action against Hindenburg should be taken

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