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- Hindenburg Claims Sebi Chief Had Stake In Offshore Entities Linked To Adani Group
New Delhi33 minutes ago
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Hindenburg Research, a firm known for its reports on the Adani Group, has leveled allegations against Securities Exchange Board of India (Sebi) chief Madhabi Puri Buch. US short-selling firm Hindenburg has claimed in its new report that the SEBI chief had stakes in shadowy offshore entities used in the money laundering scandal through the Adani Group.
Citing documents, Hindenburg said that Buch and her husband Dhawal Buch had stakes in an offshore fund in which Gautam Adani’s brother Vinod Adani had invested a large amount of money. Vinod is the chairman of Adani Group companies.
Something big is going to happen in India soon: Hindenburg
Before releasing this report, American short-selling firm Hindenburg Research had said that something big is going to happen in India soon. Hindenburg Research had written this on the social media platform a year ago after accusing the Adani Group of money laundering and stock manipulation. Through this post, Hindenburg had hinted at some new revelations. However, it has not named any company.
Adani Group was accused of money laundering and share manipulation
On 24 January 2023, Hindenburg Research published a report on the Adani Group. After the report, there was a huge decline in the shares of the group. However, there was a recovery later. Regarding this report, the Indian stock market regulator Securities Exchange Board of India (SEBI) had also sent a 46-page show cause notice to Hindenburg.
In a blog post published on July 1, 2024, Hindenburg Research said that the notice states that it has violated the rules. The company said, SEBI has alleged that Hindenburg’s report contains some false statements to mislead readers. In response to this, Hindenburg had made several allegations against SEBI itself.
Hindenburg’s allegation- SEBI is protecting fraudsters
- Hindenburg said, ‘In our view, SEBI has neglected its responsibility and appears to be doing more to protect fraudsters than to protect investors from fraudsters.’
- Hindenburg said, ‘Our understanding from discussions with Indian market sources is that the Securities Exchange Board of India’s secret assistance to Adani began almost immediately after the publication of our January 2023 report.’
- ‘After our report, we were told that SEBI had pressured brokers behind the scenes to close short positions in Adani shares. This created buying pressure and helped Adani Group shares at a crucial time.’
- Hindenburg Research said in its blog- ‘When pressured by the public and the Supreme Court to investigate the matter, SEBI appeared to falter. Initially, it seemed to agree with many of the key findings of our report.’
- Giving an example of this, the research firm said- As per Supreme Court case records: SEBI is unable to satisfy itself that the funders of FPIs are not linked to Adani. SEBI later claimed to be unable to investigate further.
Hindenburg alleges SEBI is protecting Uday Kotak’s firm
Hindenburg said that Uday Kotak’s established brokerage firms created offshore fund structures, which were used by his investor partners to profit by short selling Adani Group shares. SEBI named only K-India Opportunities Fund in the notice and masked the name ‘Kotak’ with the abbreviation ‘KMIL’. KMIL stands for Kotak Mahindra Investment.
It said the bank’s founder Uday Kotak had personally headed Sebi’s 2017 committee on corporate governance. “We suspect that Sebi’s failure to mention Kotak or any other Kotak board member may be meant to protect yet another powerful Indian businessman from the possibility of scrutiny, which Sebi appears to be acknowledging.”
In 1985, Uday started Kotak Mahindra Finance Limited.
SEBI had said 4 big things in the show cause notice
- The show cause notice has been issued in connection with the trading activity of certain entities in the shares of Adani Enterprises immediately before and after the publication of the Hindenburg Report. Prior to the release of the Hindenburg Report, concentration of short-selling activity in derivatives of Adani Enterprises was observed.
- After the release of the report, the share price of Adani Enterprises declined by about 59% during the period from January 24, 2023 to February 22, 2023. SEBI has also mentioned in its notice how the shares changed during this period from January 24, 2023 to February 22, 2023.
- K India Opportunities Fund Ltd opened a trading account and began trading in Adani Enterprises shares a few days before the publication of the report, and then squared off its short position after the publication of the Hindenburg report. This resulted in a profit of Rs 183.24 crore.
- The Hindenburg report deliberately sensationalised and distorted certain facts through the use of catchy headlines such as “scandal”. SEBI said in the notice that Hindenburg Research made misrepresentations in its report without any evidence.
After the report, Adani Enterprises’ stock fell 59%
On 24 January 2023 (25 January Indian time), the share price of Adani Enterprises, the flagship company of Adani Group, was Rs 3442. On 25 January, it fell 1.54% to close at Rs 3388. On 27 January, the share price fell 18% to Rs 2761. By 22 February, it had fallen 59% to Rs 1404. However, later the stock saw recovery. On Friday, the share of Adani Enterprises closed at Rs 3,186 with a gain of 0.60%.
Short selling means selling the shares first and buying them later
Short selling means selling shares that the trader does not have at the time of the trade. These shares are later bought to square off the position. Arrangements for lending or borrowing shares are necessary before short selling.
In simple words, just like you first buy shares and then sell them, in short selling, shares are first sold and then bought. In this way, whatever difference comes in between, that is your profit or loss.
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