Image Source : FILE PHOTO US-based short seller Hindenburg Research rocked the Adani Group with allegations of stock market manipulation

Adani-Hindenburg row: Hindenburg Research, the US-based short-seller, said it received a show-cause notice from India’s capital market regulator Securities and Exchange Board of India (SEBI) in the Adani Group case. Hindenburg said that the notice outlines suspected violations by the short-seller of Indian regulations.

Last year, the Hindenburg report had rocked the Adani Group with allegations of stock market manipulation and accounting fraud. 

Hindenburg terms notice as nonsense 

Hindenburg termed the show cause notice as ‘nonsense’ and an attempt to silence and intimidate those who expose corruption and fraud perpetrated by the most powerful individuals in India. “We are sharing the entirety of this notice, frankly because we think it is nonsense, concocted to serve a pre-ordained purpose: an attempt to silence and intimidate those who expose corruption and fraud perpetrated by the most powerful individuals in India,” the firm said.

The New York-based firm, in a statement, said it had while putting out the report that alleged “brazen stock manipulation and accounting fraud scheme over the course of decades” at the Adani group, disclosed that it was short on Adani (meaning it had anticipated a fall in the value of stock and thus traded on it).

It disclosed that Kotak Bank created and oversaw an offshore fund structure that was used by its “investor partner” to be against the conglomerate but hastened to add that it may “barely come out above breakeven” on its trade.

Without disclosing the name of the investor, Hindenburg said it made USD 4.1 million in gross revenue through “gains related to Adani shorts from that investor relationship” and just USD 31,000 through its short position of the conglomerate’s US bonds. Adani group has repeatedly denied all allegations.

SEBI made nebulous allegations on Hindenburg report

“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 works ‘hand in glove’ with conglomerates like Adani to help it skirt regulations,” it said.

It said that the market regulator SEBI made ‘nebulous allegations that our report contained misrepresentations and inaccurate statements meant to mislead readers.’

The US firm said the show cause notice does resolve some questions: “Did Hindenburg work with dozens of firms to short Adani, making hundreds of millions of dollars? No – We had one investor partner, and net of costs we may barely come out above breakeven on our Adani short.

“Our work on Adani was never justifiable from a financial or personal safety perspective, but it is by far the work we are most proud of,” it said.

Hindenburg said it received an email from SEBI on June 27 and later a show cause notice outlining suspected violations of Indian regulations.  

Adani-Hindenburg row

Hindenburg Research in a damning January 24, 2023 report accused the Adani Group of brazen stock manipulation and accounting fraud, which led to a stock market rout that erased about USD 150 billion in the group firms’ market value at their lowest point.

In February, the Supreme Court refused to form the SIT to probe the Adani group over allegations by the US-based short seller Hindenburg Research and said that market regulator SEBI will continue to investigate.

A bench comprising Chief Justice D Y Chandrachud and justices J B Pardiwala and Manoj Misra said that it cannot regulate SEBI’s power of investigation. The Apex court also ruled that ’till now’ no concrete evidence has come out against Gautam Adani. SEBI has completed its probe in 22 out of 24 cases relating to allegations against the Adani group.

The apex court also said that the facts of the case do not warrant the transfer of the probe into the matter to a Special Investigation Team (SIT) or other probe agency.

(With PTI inputs)

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