Hindenburg Research criticized India’s markets regulator for its failure to address the alleged fraud in a report on the Adani Group last year. The short-seller claimed to have made gains of over $4 million during the market turmoil that followed the release of the report. According to Hindenburg, the Securities and Exchange Board of India (Sebi) appears to be more focused on targeting those who expose fraudulent practices rather than investigating the allegations against billionaire Gautam Adani’s business empire.
In a statement on its website, Hindenburg revealed that Sebi had issued a notice in June regarding inaccuracies in its January 2023 report on the Adani Group. The report generated approximately $4.1 million in revenue from Adani shorts and around $31,000 from its own short position on Adani US bonds.
The previous year, Hindenburg accused the ports-to-power conglomerate of extensive corporate wrongdoing, labeling it as “the biggest scam in corporate history.” Although the Adani Group has consistently refuted Hindenburg’s claims, the resulting decline in stock prices had, at one point, erased over $150 billion in market value of its listed companies. However, the Adani Group has managed to regain most of the lost stock value since then.
Masking Kotak
Sebi’s notification conspicuously omitted to identify the entity with a direct connection to India: Kotak Bank, which established and managed the offshore fund structure utilized by Hindenburg’s investor partner to take a position against Adani, as per Hindenburg. The regulator obscured the name “Kotak” with the abbreviation “KMIL,” it further stated. KMIL stands for Kotak Mahindra Investments Ltd., the asset management firm.
Hindenburg criticized Sebi for failing to fulfill its obligations, appearing to prioritize shielding wrongdoers rather than safeguarding defrauded investors, as stated in the announcement. The Indian markets regulator has not yet responded to Bloomberg’s request for a statement. Representatives for Kotak and the Adani Group have not promptly responded to requests for comments.
Following Hindenburg’s Adani report, the Supreme Court of India has directed Sebi to investigate the allegations and has established an expert panel to examine regulatory shortcomings. Earlier this year, the court instructed Sebi to conclude its inquiry within three months and declared that further investigations are unnecessary.
Hindenburg’s most recent criticism coincides with a period in which India’s revitalized opposition parties have been condemning Prime Minister Narendra Modi for promoting crony capitalism and showing favoritism towards billionaires such as Adani and Mukesh Ambani at the expense of the general population. This has led to a heated confrontation in parliament this week.