(Bloomberg) — Gautam Adani published a 413-page rebuttal to a short seller’s allegations of widespread corporate malfeasance, seeking to calm investors in the midst of a $2.5 billion share sale and stem a rout that wiped out more than $50 billion of his group’s market value.

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In a Sunday statement, the Adani Group said some 65 of the 88 questions raised by Hindenburg Research have already been addressed in public disclosures and called the US firm’s conduct “nothing short of a calculated securities fraud under applicable law.” It also repeated a threat of legal action.

Read the full text of Adani’s rebuttal here

Asia’s richest man, who is widely perceived as being close to India’s Prime Minister Narendra Modi, also sought to portray Hindenburg’s charges against his conglomerate as an attack against his home country, in a bid to garner support from nationalists. The tycoon has often aligned his businesses with Modi’s development goals, building capital-intensive infrastructure such as ports and airports.

“This is not merely an unwarranted attack on any specific company but a calculated attack on India, the independence, integrity and quality of Indian institutions, and the growth story and ambition of India,” Adani said in its response.

Hindenburg said the response failed to answer most of its questions.

Hindenburg Says Adani’s Nationalist Rebuttal Ignores Allegations

Adani’s rebuttal may not be sufficient to assuage investor concerns, said Brian Freitas, an analyst at Smartkarma.

“Just because things are disclosed and known does not make them right,” Freitas said. “How does a group that big explain no analysts coverage and no mutual fund holdings? For me, the biggest issue is the shareholding pattern that is helping keep valuations at stratospheric levels. There will be additional scrutiny given how long this saga has gone on, but think the impact on the overall market will be small.”

Story continues

Hindenburg Says Adani Rebuttal Does Not Answer Most Questions

The back-and-forth comes during the last leg of the follow-on offer by Adani Enterprises Ltd., which is scheduled to close Tuesday. It received overall subscriptions of 1% on Friday, when bonds and shares of Adani entities plunged — some of them by their daily 20% limits. While investors in Indian public offerings typically wait until the last day to place bids, there were concerns that Hindenburg’s attack would sour sentiment. Adani himself lost more than $20 billion of his personal wealth last week.

“Adani-linked shares are not that liquid, so there could be some pullback, and demand for the follow-on public offer is also an issue,”said Nitin Chanduka, a Bloomberg Intelligence strategist. “Rarely do stocks reverse in a V shape, so maybe the shares will consolidate at these levels or fall further.”

In a sign the turmoil is likely to continue this week, dollar bonds of Adani Ports & Special Economic Zone Ltd. maturing in 2024 dropped 1.1 cents on the dollar on Monday in early trading amid volatile moves as investors digest the group’s rebuttal. Adani Transmission’s 2026 bond was quoted at a fresh record low of 83.4 cents on the dollar.

Hindenburg published a 100-page report on Jan. 24, the eve of Adani’s share sale opening, alleging that its two-year investigation found “brazen stock manipulation and accounting fraud.” It also called out the conglomerate’s “substantial debt.” The firm, which said it has taken a short position in Adani’s companies through US-traded bonds and non-Indian-traded derivatives, declined to share details of the trade when reached by Bloomberg News.

These are some of the highlights of the Adani response:

• On regulatory investigations targeting Adani’s younger brother and brother-in-law and their executive roles in Adani entities, the group says the matters, part of public disclosures, are “closed and dismissed in our favor” and have been cited “solely in an attempt to further the narrative of lies.”

• On the roles of Adani’s older brother, Vinod, the group says he “does not hold any managerial position in any Adani listed entities” or units and no role in their day-to-day affairs; not in a position to comment on his business dealings.

• On the query about the source of funds for some offshore investor entities, Adani says they are public shareholders in the Adani portfolio and “innuendoes that they are in manner related parties of the promoters are incorrect”; a listed entity has no control over who buys, sells and owns publicly traded shares, and so cannot comment.

• On the question of why Adani has continued to work with Amicorp, Adani says it is a “recognized firm that provides secretarial services to various entities from across the globe and not just the Adani portfolio entities.”

• On the choice of Monarch Networth Capital to run share sales, Adani says the firm was selected for its credentials and ability, and the alluded one-month suspension more than a decade ago has no relevance.

• About SEBI investigation and prosecution of more than 70 entities and individuals, including Adani promoters, for manipulating stock between 1999 and 2005, Adani says there are no ongoing proceedings against Adani promoters before SEBI in relation to this issue, and they have been “duly disclosed.”

• On pledged shares and risks to counter parties, Adani says it is a common practice globally and there’s a robust disclosure system in place in India; Hindenburg’s narrative “has no basis and stems from ignorance of the securities laws in India.”

• On Adani Enterprises having had five CFOs over the course of eight years, and Hindenburg saying that’s a “key red flag,” Adani says several of those executives are still part of the organization in various other roles, while some “left to pursue individual ambitions.”

• On why the independent auditor for Adani Enterprises and Adani Gas is a tiny firm, the group says the auditors have been “duly certified and qualified by the relevant statutory bodies” and have been “appointed in compliance with applicable laws”; “there are more than 35 statutory audit firms that audit the various entities within Adani Enterprises, including a mix of Big 6.”

–With assistance from Ishika Mookerjee and Abhishek Vishnoi.

(Updates with analyst comment in sixth paragraph.)

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