United States-based short-seller Hindenburg Research on Monday claimed that it has received a ‘show cause’ notice, outlining suspected violations over its short bet against Adani Group last year.

Signage atop the Adani Group headquarters in Ahmedabad.(Bloomberg)

Hindenburg Research, which had accused Adani Group of improper use of tax havens and flagged concerns about debt levels in a report in 2023, termed SEBI’s notice as an attempt “to silence and intimidate those who expose corruption and fraud perpetrated by the most powerful individuals in India”.

“After 1.5 years Of investigation, SEBI identified zero factual inaccuracies with our Adani research. Instead, the regulator took issue with things like: Our use of the word “scandal” when describing multiple prior instances of Adani promoters being charged with fraud by Indian regulators and our quoting of an individual that alleged SEBI is corrupt and work ‘hand in glove’ with conglomerates like Adani to help it skirt regulations.”

It added that the market regulator made nebulous allegations that Hindenburg’s report contained misrepresentations and inaccurate statements meant to mislead readers.

“In our view, SEBI has neglected its responsibility, seemingly doing more to protect those perpetrating fraud than to protect the investors being victimized by it,” the firm said.

Further, Hindenburg Research said while, the SEBI seemingly tied itself in knots to claim jurisdiction over the firm, it “conspicuously failed to name” to name Kotak Bank, which it added was the party with an actual tie to India.

“While SEBI seemingly tied itself in knots to claim jurisdiction over us, its notice conspicuously failed to name the party that has an actual tie to India: Kotak Bank, one of India’s largest banks and brokerage firms founded by Uday Kotak, which created and oversaw the offshore fund structure used by our investor partner to bet against Adani,” the group said. “Instead it simply named the K-India Opportunities fund and masked the “Kotak” name with the acronym “KMIL”.

It added, “Uday Kotak, founder of the bank, personally led SEBI’s 2017 Committee on Corporate Governance. We suspect SEBI’s lack of mention of Kotak or any other Kotak board member may be meant to protect yet another powerful Indian businessman from the prospect of scrutiny, a role SEBI seems to embrace.”

Adani-Hindenburg row

In its January report last year, Hindenburg had alleged improper use of tax havens and flagged concerns about debt levels. The report had triggered an $86 billion rout in the Adani group’s domestically listed stocks and a sell-off in its bonds listed overseas.

On February 9, the Supreme Court agreed to hear a plea seeking Centre to set up a panel monitored by a retired top court judge to probe the allegations levelled against Adani in the report.

However, on January 3 this year, the Supreme Court refused to form the SIT to probe Adani group and said that market regulator Sebi will continue to investigate.

The court said the SEBI has not failed to regulate, and the market regulator cannot be expected to carry on its functions based on press reports, though such reports can act as inputs for the SEBI.