Hindenburg Research has alleged that the Securities and Exchange Board of India (SEBI) pressured brokers to close their short positions in Adani Group stocks under the threat of a regulatory probe.
The US short seller that came into the limelight in January 2023 after releasing a scathing 106-page report on Adani Group, alleged that the Indian markets regulator did so with the intent of creating a floor price for the stocks that had come under heavy selling pressure after the report's release in January.
The report eroded $150 billion in the cumulative market capitalisation of the Adani Group stocks in the weeks following its release.
“Following our report, we were told that SEBI pressured brokers behind the scenes to close short positions in Adani under the threat of expensive, perpetual investigations, effectively creating buying pressure and setting a ‘floor’ for Adani’s stocks at a critical time,” Hindenburg said in a post on its website.
It further added that the Indian capital market regulator initially “seemed to agree with several key findings from our report” but when pressed by the public and the Supreme Court to investigate the issues, the regulator “appeared to flounder”.
“The entire concern expressed by SEBI (and this precedes the publication of the Hindenburg Report) is that SEBI is unable to satisfy itself that the contributors of the funds to the FPIs are not linked to Adani,” the blog said, citing Supreme Court matter records.
Also Read: Hindenburg trashes Sebi show-cause notice as 'nonsense' and 'concocted'
The US-based short seller alleged that the Indian regulator later on claimed that it was unable to investigate further and that the court documents showed that Sebi had conveniently “drawn a blank” and that further enquiry could be a “journey without a destination,” underscoring its inability or unwillingness to probe serious allegations against Adani.
The latest developments follow closely on the heels of the Indian regulator issuing a show cause notice to Hindenburg, alleging various violations and wrongdoings.
Spokespeople for SEBI, Kotak Mahindra Bank and Adani Group did not respond to emails seeking comment.
The US entity, however, has called the Sebi notice “nonsense” and “concocted”.
On January 24, 2023, Hindenburg published a report accusing Adani group companies of stock manipulation and accounting fraud ahead of a proposed Rs 20,000 crore share sale by Adani Enterprises. The conglomerate termed the report as malicious and baseless.
Meanwhile, India's Supreme Court ruled in January that the Adani Group won't face any further investigations beyond Sebi's current scrutiny, offering relief to the conglomerate. Sebi has been probing the Adani group for tax haven use and stock manipulation. The verdict suggested no heightened regulatory risk for Adani. The court also decided against altering disclosure rules for offshore funds, despite Hindenburg's claims.
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