Observations of an expat: The Adani scandal

The Adani scandal is big. It is big because it involves hundreds of billions of dollars; valuable and important infrastructure throughout Asia and could potentially suck in the government the government of Indian Prime Minister Narendra Modi.

First of all, who are the key players in this saga? They are the Adani Group’s founder Gautam Adani, Nate Anderson of Hindenburg Research and Prime Minister Modi.  Last week, Adani, was the third richest man in the world. Today he is the 15th richest following the damning report by Hindenburg.

The Indian tycoon was a school dropout who started his business career in Mumbai as a diamond trader. But he soon moved back to his home state of Gujarat (where Modi was chief minister) and switched to commodities trading. Using Gujarat as his base, Adani established a business empire that includes India’s largest cement company, 13 ports, seven airports, six power stations and much more. The Adani Group even runs its own private railway and electricity supply.

Adani has 23,000 employees and ten days ago the conglomerate had a market capitalisation of $230 billion. At the end of this week it was $120 billion and falling.

Now, who is Nate or Nathaniel Anderson? He is a former New York trader who founded Hindenburg Research with the aim of blowing the whistle on corporate fraud.  Hindenburg forensic accounting techniques and good old detective work to uncover corporate fraud and corruption. It analyses public records, internal corporate documents and conducts confidential interviews with whistle blowing employees.  Most of their investigations take about six months. The Adani analysis lasted two years.

Hindenburg’s work is not altruistic. In fact, they make a lot of money from each report. When the research is complete a paper is privately circulated to a small group of investors who then take a short position on the company’s stock. The report is released to the media, the company’s stock plummets and the Hindenburg investors walk away substantially richer.

This may sound like a corporate hatchet job. But every report that Hindenburg has issued since 2016 has been spot on in its expose of fraud and corruption.

In the case of the Adani Group they have accused the management of “brazen stock manipulation and accounting fraud over the course of decades.” They are guilty, claim Hindenburg, of “the biggest con in history.”

Hindenburg Research has also implicated the pro-business government of Narendra Modi. Even before Hindenburg, questions were being asked about the close relationship between Modi and Gautan Adani during Modi’s tenure as chief minister of Gujarat and later as Prime Minister. These have involved allegations of supplying subsidised energy to Adani and investment money from public companies.

Narendra Modi is pro-business and as a result the Indian economy has flourished, created jobs, raised living standards  and won votes for Modi.  But there have been suggestions that at least some of this expansion has a corrupt foundation. The Hindenburg report pointed out that “criticism of India’s elite businessmen and politicians has increasingly resulted in journalists being imprisoned or outright murdered. Stock market analysts have been arrested for writing negatively about companies.”

Both Gautan Adani and the government fiercely deny all the allegations in the Hindenburg Report. But the opposition Congress Party has seized on it and demanded a full parliamentary inquiry. At the moment the government is blocking it, but if Hindenburg’s allegations stand up, they will be hard pressed to stop it.


* Tom Arms is foreign editor of Liberal Democrat Voice and author of “The Encyclopedia of the War” and the recently published “America Made in Britain". He has a weekly podcast, Transatlantic Riff.

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This entry was posted in Op-eds.


  • Laurence Cox 4th Feb '23 - 11:02am

    “Hindenburg’s work is not altruistic. In fact, they make a lot of money from each report. When the research is complete a paper is privately circulated to a small group of investors who then take a short position on the company’s stock. The report is released to the media, the company’s stock plummets and the Hindenburg investors walk away substantially richer.”

    Surely, this is insider trading: https://www.investopedia.com/terms/i/insidertrading.asp

    Even though they are exposing criminals, this sort of action has a dirty smell to it.

  • Mel Borthwaite 4th Feb '23 - 12:39pm

    Shorting a company’s shares is something I believe is unethical and should be made illegal, but doubt anything will ever be done about it. Basically, major players like hedge funds believe that a company share price can be driven down so they ‘borrow’ shares from large owners and sell them on the market to drive the price down. Once they believe the price is as low as it will go, they buy back the shares the had sold so as to return them to the original owners along with a fee for having borrowed the shares. This nets a tidy profit to the manipulator who sold at the higher price and then bought back at the lower price. The losers are often smaller investors who lose confidence when they see share price falling and sell out.

  • Interesting article – thank you.

    Martin & Mel – it appears that Hindenburg are mostly doing a deep dive into evidence that is available to anyone persistent enough who knows where to look. It might only be “insider trading” if any “whistle blowing employees” are cultivated (and paid?) uniquely by Hindenburg for that purpose.

    But in principle, doing research on companies to inform investment decisions is entirely normal.

    Regarding short selling, some hedge funds take huge short positions specifically to manipulate a share price. In this case, the funds are taking advantage of research they paid for that indicates something dodgy has been going on, because that dodginess has led to a share price that is artificially and fraudulently high.

    In other news this week, some hedge funds have made big losses on short positions because stock markets have been much more buoyant than expected lately.

  • David Langshaw 4th Feb '23 - 10:41pm

    It is not insider dealing as long as the information that the Hindenberg team analyses is all in the public domain, and the conclusions it reaches can be regarded as reasonable based on the information they have used. Market analysts frequently come to different conclusions about companies they analyse, and fund managers are often willing to pay a premium for research which goes against the consensus.

  • Mark Frankel 5th Feb '23 - 9:02am

    See also the two-part documentary about Modi on BBC, ‘India: The Modi Question’, which has been banned in India.

  • Mel Borthwaite 4th Feb ’23 – 12:39pm:
    Shorting a company’s shares is something I believe is unethical and should be made illegal,…

    It’s no more or less ethical to take a short position as a long position. For every seller there has to be a buyer. Short selling increases market liquidity and helps reduce unsustainable bubbles.

    For most larger listed companies traded options are available. Short positions are taken by purchasing Put Options (or by writing Call Options). These can be traded at their current market price or kept to expiry. Adani Enterprises has an active options market across a range of strike prices…

    Adani Enterprises – Option Chain:

    Some impressive gains there. Currently, the hot money appears to be on a rebound…

    ‘Put Call Ratio of Adani Enterprises Ltd. (ADANIENT) and its interpretation’:

    David Langshaw 4th Feb ’23 – 10:41pm:
    It is not insider dealing as long as the information […] is all in the public domain,…

    It might be if they used a tip-off from a company insider on where to look and acted on that before publication. Another issue today is where such information is published, but suppressed by legacy media leaving many market participants uninformed. A recent example being the Project Veritas Pfizer exposé…

    ‘Pfizer Executive: ‘Mutate’ COVID via ‘Directed Evolution’ to Continue Profiting Off of Vaccines’:

  • David Langshaw 5th Feb '23 - 8:51pm

    Thanks, @Jeff – I agree, the problem of relying on whistleblowers creates some interesting paradoxes. But I would think that publication of information is a matter of fact rather than legal construction – if the information can be seen on a public site – even if it requires a subscription – then it is reasonable for someone to see it and rely on it if they wish.

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