US short seller renews attack on Indian conglomerate

US-based investment research firm Hindenburg Research has alleged that the head of India’s stock exchange regulator was involved in trading the shares of major Indian conglomerate Adani Group, thus preventing a proper investigation into supposed financial irregularities engaged in by Adani that Hindenburg claims to have uncovered earlier. 

The latest developments are a continuation of a saga that began early last year when Hindenburg issued a bombshell report alleging irregularities by Adani Group. This led to a steep decline in the conglomerate’s share price. Hindenburg is a research firm with a focus on activist short selling. 

In its report released on Saturday, Hindenburg claimed that the chairperson of the Securities and Exchange Board of India (SEBI), Madhabi Puri Buch, and her husband Dhaval Buch, had held stakes in “obscure offshore funds” – exposed by the firm earlier in what it called “stock market manipulation” – which were also used by Adani Group, which is led by Gautam Adani. Last year, Hindenburg issued allegations of financial irregularities against Adani Group, which led to a steep decline in the conglomerate’s share price. 

The report, citing “whistleblower documents,” claimed that these entities were part of a network used by Gautam’s brother Vinod Adani to “siphon money.” Hindenburg also accused the market regulator of showing a “surprising lack of interest in Adani’s alleged undisclosed web of Mauritius and offshore entities.” 

The Buchs denied the allegations, saying their lives and finances are “an open book.” Adani Group also denied the allegations on Sunday, calling them “malicious,” and “manipulative.” In a statement, the group said the new Hindenburg report is a “recycling of discredited claims that have been thoroughly investigated, proven to be baseless, and already dismissed by the Hon’ble Supreme Court in January 2024.”  

A Hindenburg report released in January 2023 described Adani Group as “highly overvalued” and claimed it had “engaged in a brazen stock manipulation and accounting fraud scheme over the course of decades.” This caused the valuation of the group to fall by around $145 billion at its lowest point. In the aftermath of these accusations, a number of public interest litigations were filed with the Supreme Court by lawyers, activists, and several leaders of the opposition Congress Party, seeking a court-monitored probe into the matter.  

In a victory for Adani Group, in January 2024, the Supreme Court refused to order a special probe into Hindenburg’s allegations and directed SEBI to complete its own investigation into the alleged manipulation within three months. The court added there were no grounds to doubt the investigation carried out by SEBI. 

In June 2024, Hindenburg disclosed it had received a ‘show cause’ notice from the SEBI over alleged violations in placing bets on the conglomerate’s stock. The company dismissed this as “an attempt to silence and intimidate those who expose corruption and fraud perpetrated by the most powerful individuals in India.” 

Gautam Adani has called Hindenburg’s allegations and related investigations by international media outlets and the Organized Crime and Corruption Reporting Project investigative platform – known for its work on the Panama Papers and Pandora Papers – as attempts to malign the group. Adani noted that the OCCRP is funded by several governments and non-government organizations, including the Open Society Foundation of American investor George Soros, “who has openly declared his hostility against the Adani Group.” Soros had previously raised questions about Indian Prime Minister Narendra Modi and Adani being “close allies."