India’s stock regulator SEBI probes report claims against Adani

SEBI probes claims against Adani

The Securities and Exchange Board of India (SEBI) has told the Supreme Court that it is investigating the Hindenburg Research report’s claims of financial irregularities among the Adani group of companies.

“As the matter is in the early stages of examination, it may not be appropriate to list details about the ongoing proceedings at this stage,” the SEBI said in a written note to the Supreme Court.

The SEBI also said it was not in favour of banning short-selling or the sale of borrowed shares, which is Hindenburg’s primary activity.

In its note to the Supreme Court, the SEBI elaborated on Hindenburg’s activity, noting that the US-based firm founded by Nathan Andersen in 2017 is a short seller and research company. It is among many firms in the US that conducts research on companies that it believes have governance and financial issues.

The firm publishes research reports on its website and typically profits when the value of its targets’ shares falls, the SEBI added.

The SEBI also said its additional surveillance measure – a framework to safeguard investor interests and enhance market integrity – was triggered on a number of occasions and for extended periods of time during the period of significant volatility in share prices of the “group’s companies, advising investors of the increased risk levels”.

The Supreme Court last week sought the views of the government and the SEBI to protect Indian investors following the filing of a writ by concerned petitioners in February.

On 24 January, the Hindenburg Research report claimed that the Adani group, with INR17.8 trillion (USD218 billion) in assets and one of India’s most powerful conglomerates, had engaged in stock manipulation and accounting fraud.

Adani published a 413-page response to the allegations on 29 January, stating that all the allegations were “baseless and defamatory”, and that the Hindenburg report was driven by “an ulterior motive to create a false market”, one that would allow the US-based firm to make financial gains.

One month after the Hindenburg report, many of the Adani group’s equities, including Adani Total Gas, Adani Green Energy and Adani Transmission, were reportedly trading at multi-year lows and the group had lost almost USD100 billion in wealth.

On 10 February, petitioners including Delhi-based lawyer Manohar Lal Sharma filed a writ in the Supreme Court seeking “action against Hindenburg” for exploiting investors through short selling of shares that led to the plummeting stock prices of the Adani group of companies.