Hindenburg Hits Back at SEBI’s Show-Cause Notice in Adani Case: Calls It an Attempt to Silence Critics

Hindenburg Receives Notice from SEBI

Hindenburg Research, a US-based short-seller, has been issued a show-cause notice by India’s capital market regulator, the Securities and Exchange Board of India (SEBI). The notice pertains to suspected violations of Indian regulations in the context of the Adani Group case.

Allegations Against Adani Group

In January 2023, Hindenburg Research released a report accusing the Adani Group of engaging in stock market manipulation and accounting fraud. The report caused significant turmoil, leading to a sharp decline in the stock value of Adani companies.

Hindenburg’s Response: ‘Nonsense’ Notice

Hindenburg has dismissed the SEBI notice as “nonsense” and an attempt to suppress those exposing corruption. The firm stated, “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.”

Financial Disclosure and Alleged Manipulations

Hindenburg had earlier disclosed that it was short on Adani, anticipating a fall in the stock’s value. The firm revealed that Kotak Bank created an offshore fund structure used by its investor partner against the conglomerate. Despite this, Hindenburg noted that it might “barely come out above breakeven” from the trade.

Earnings and Investor Details

Hindenburg reported making USD 4.1 million in gross revenue from its Adani shorts through an investor relationship and USD 31,000 from its short position on Adani’s US bonds. The firm did not disclose the name of the investor. Meanwhile, the Adani Group has consistently denied all allegations of wrongdoing.

SEBI’s Allegations: ‘Nebulous and Inaccurate’

Hindenburg criticized SEBI’s allegations, stating that the regulator found no factual inaccuracies in their report. Instead, SEBI took issue with the firm’s language and quotations that suggested corruption. Hindenburg said, “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.”

Resolving Key Questions

Hindenburg addressed speculations regarding their profits from the Adani short, clarifying that they had only one investor partner. The firm stated, “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.”

Hindenburg’s Commitment to Exposing Fraud

Hindenburg asserted that their work on the Adani case was not driven by financial gain or personal safety but was motivated by a commitment to exposing fraud. The firm said, “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.”

Background: Adani-Hindenburg Controversy

The controversy began with Hindenburg’s January 24, 2023 report that accused the Adani Group of extensive stock manipulation and accounting fraud. This led to a market crash, wiping out approximately USD 150 billion from Adani firms’ market value.

Supreme Court’s Role

In February, the Supreme Court of India declined to form a Special Investigation Team (SIT) to probe the Adani Group based on Hindenburg’s allegations. The court ruled that SEBI should continue its investigation. The bench, including Chief Justice D Y Chandrachud and justices J B Pardiwala and Manoj Misra, stated that SEBI had found no concrete evidence against Gautam Adani thus far.

Progress on SEBI’s Investigation

SEBI has completed investigations in 22 out of 24 cases related to the Adani Group. The Supreme Court has granted SEBI an additional three months to investigate the remaining two cases. The court also reiterated that there is no need to transfer the investigation to another agency.

Adani’s Statement

Following the Supreme Court’s ruling, Adani expressed gratitude in a post on X (formerly Twitter). He wrote, “The Hon’ble Supreme Court’s judgement shows that: Truth has prevailed. Satyameva Jayate. I am grateful to those who stood by us. Our humble contribution to India’s growth story will continue. Jai Hind.”

The Adani-Hindenburg saga continues to unfold, with significant implications for market transparency and regulatory oversight in India.

(With inputs from agencies)

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