Is Adani shares will raise or fall ?

Is Adani shares will raise or fall ?

Adani's shares will rise or fall, now it will depend on two things.

  1.  If Adani Group proves the allegations by Hiddenburg wrong then they may come back again or else their shares will fall further.                                                                 
  2.  People's faith will decide whether the shares of Adani Group will rise or fall because if the same allegations were made on TATA Group then the whole country would have been with TATA Group.
Adani Group vs Hiddenburg Research 

On January 25th 2023, Hiddenberg released 106 page report on its website, containing 88 question ask from the Adani group, and 720 citations, meaning the evidence was provided for why it was said.The title of the report was "How The World's 3rd Richest Man is Pulling The Largest Con in Corporate History". This report was made after two years of research and multiple travel to different countries where Adani Group links were found. 

Hiddenberg Research don't even let to know anyone that on whom they are researching.In case of Adani, New York magazine published a detailed report in January 2022, on which it was written Nathan Anderson is downloading entire Mauritius Corporate Registry but it was unclear at the time who was being researched. It has been revealed that this was part of an investigation into the Adani Group. The report was very attacking towards the Adani Group and did not show any leniency. The report created a storm in India, and as results, Adani 's ranking on the list of the richest people in the world went from the third to the eight. The company suffered a loss of 65 billion dollars. Loha circuit had to put on Adani stop which means you can't exit by selling shares at the particular lowest price. Adani shares,  including Adani Ports, Adani Power and Adani Green,all dropped, causing a loss for Adani and also affecting the Indian stock market, which lost 4lakh crore rupees. 

Regarding the Hindenburg report, it contain multiple allegation against the Adani group.Let me explain you some major allegation. The main allegation is stock manipulation, which has been an ongoing issue for the Adani group.
For example, in March 2020, the price of a share of Adani Enterprise was around 130 rupees, and by November 2022 the price had risen to over 4,000 rupees. This is not a normal occurrence for a share price to increase so rapidly. "What did Adani Enterprise do to cause such a rapid increase in its stock price in such a short amount of time, even during the coronavirus pandemic and when the market is closed due to recession - like conditions? The image shows how Adani group's company has risen high in just three years, as reported in the share." 

You may say shares were in demand, that's why Adani shares price increased. Why to panic for this ? It just a game of demand and supply. But one should also think about why people are buying Advani's share at such price? You can say that performance is good, Adani has made so much profit that people are forced to buy shares. During the time of Corona and recession, their performance was not that great, so how did their shares increase ? This is because they created an artificial demand.  

If a company is listed on a Stock Market Exchange, it becomes easy for the company to control demand and supply, and also control the share prices, which can make the company rich or poor. That's why SEBI has made a rule that no listed company can hold more than 75% shares, to keep the market fair. Normally, companies keep 40 - 50% shares with them, but Adani keep 75% of shares with them and for other 25% of shares. They create fake demand by investing through their own shell company which is in Mauritius, Singapore and UAE. So Adani have majority control indirectly as per Hiddenberg report. Apart from this let me tell you another thing, LIC and SBI (where you take insurance from LIC and deposit your money in SBI) have been invested in Adani's shares. LIC has bought Adani's shares for 74 thousand crore rupees, and SBI has also invested thousands of crore in the Adani group's shares. They have also given loans, which is separate, this is just investment with all this Adani shares demand is increasing and when common man sees this, then he also wanted to make money through Stock Market . So the aelegation on Adani Group is that they have increased their share price by creating Artificial demand and not by Adani Group performance and when government organisation like SBI and LIC invest then this indicate the involvement of Government with Adani. 

The share price decide "Asia's Richest","World Richest". Company's value increase depending on increasing in share price and owner of company will become more rich. Let's say I have a company with a total of 100 shares. A investor comes and buys 10 shares for 10 thousand. When this happens, my company's valuation becomes 1 lakh. Similarly, when companies like LIC and SBI invest, the company's valuation increases and the price of shares goes up. And then these shares are used as collateral to take out a loan.

Adani Group has taken this loan of 2 lakh crore and if a 10 - 12% interest is charged, like it is charged on a common person, then the profit of many companies under Adani Group won't even reach that much. To understand this, there is also a chart of Current Ratio in the Hiddenberg report. The best way to understand the financial condition of companies is to find out their Current Ratio.  Calculate current assets divided by current liabilities to find the Current Ratio . If the ratio is less than 1, it means that if the company is asked to return the death, it won't have enough assets to sell to pay the death. 

According to Hiddenberg, the Current Ratio of 5 companies under Adani Group Adani Green, Adani Power, Adani Total Gas, Adani Transmission and Adani Enterprises is less than 1. Imagine a scenario where are a company has not been able to make a profit or there is a recession or Adani Total Gas, which has a Current Ratio of 0.2, meaning it has taken 5 times the depth compared to its assets, how will it repay its remaining dept. And when a company takes a loan by giving its shares  collateral, the loan amount is based on the share price. For example if the share is worth a lakh rupees, then that much loan will  be given. If for some reason the share price decreases the Bank can ask for the loan to be returned. In that case Adani group can be in trouble. This report tells that Adani Group  has taken loan more than needed .

Before the Adani Group investing, Hiddenberg's biggest investigations was into a company Nikola, which manufactured electric vehicles. Hiddenburg named their report on Nikola "An Ocean of Lies". At the time, Nikola's market value was 34 billion dollars, but after the Hindenburg report was released, it's value dropped to only 1.3 billion dollars. It is not always the case that the shares of the company being investigated decreases and a case against it may also be initiated.

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