Will Adani Enterprises regain a total market cap of $50B before 2028?

Adani Group is a conglomerate of companies headquartered in India. It is one of the largest business houses in India, with interests in diverse sectors such as ports and logistics, agribusiness, energy, real estate, financial services, and defense. In early 2023, it had a total market cap of over $200B. Its "flagship" company, Adani Enterprises, had a total market cap of over $50B with a P/E ratio of 343 at the height in September 2022.

On January 24, 2023, Hindenburg Research, a short-selling investment research firm, published a report on the Adani Group and its Founder and Chairman Gautam Adani, who was the 3rd richest man in the world. In it, they alleged widespread accounting fraud and stock manipulation over the course of decades.

We have identified 38 Mauritius shell entities controlled by Vinod Adani or close associates. We have identified entities that are also surreptitiously controlled by Vinod Adani in Cyprus, the UAE, Singapore, and several Caribbean Islands.

Many of the Vinod Adani-associated entities have no obvious signs of operations, including no reported employees, no independent addresses or phone numbers and no meaningful online presence. Despite this, they have collectively moved billions of dollars into Indian Adani publicly listed and private entities, often without required disclosure of the related party nature of the deals.

The Vinod-Adani shells seem to serve several functions, including (1) stock parking / stock manipulation (2) and laundering money through Adani’s private companies onto the listed companies’ balance sheets in order to maintain the appearance of financial health and solvency.

This offshore shell network also seems to be used for earnings manipulation.

In response to this report, the total market cap of Adani Group crashed by over $100B, representing a roughly 50% drop that was spread relatively equally amongst its constituent companies such as Adani Enterprises, which dropped to a level of $24.50B as of early February 2023. Even a 413-page response from Adani could not convince the markets of the financial health of the group. Hindenburg's estimated downside for the group is at 85%

The Adani response, as analysts have pointed out, resolves to framing the short seller’s report as an attack on India, as Adani has been seen as central to the economic prospects of India, for example via its 'Make in India' defense operations. This raises additional geopolitical issues that complicate the overall picture, as the risks of a group-wide collapse may substantially impact parts of the Indian economy.