India Finance
Widespread calls for probe into Hindenburg allegations of fraud, manipulation
Feb 01, 2023
Calls for an investigation into Hindenburg's allegations about the Adani Group span the political divide in India

A damning report into the Adani Group by US-based short-selling firm Hindenburg Research has snowballed into an unprecedented stock market rout. Over US $70 billion has been wiped off the market value of the Adani Group’s listed companies. Calls for investigations by Indian regulatory authorities are growing ever louder. In this report, AdaniWatch flags crucial issues that invite official scrutiny.

Adani Group companies listed on India’s stock exchanges have lost over US $70 billion in market capitalization over the three trading days since the release of an explosive report by US-based investment research firm Hindenburg Research on 24 January 2023.

Explosive: the Hindenburg report's allegations led to fiery exchanges between the US-based research company and the Adani Group

The Hindenburg report termed the Adani Group the ‘biggest con in corporate history’ and accused it of engaging in a ‘brazen stock manipulation and accounting fraud scheme’.  Hindenburg took a short position on bonds issued by the Adani Group, causing a rout on India’s stock market.

The report said that the Hindenburg researchers uncovered ‘evidence of brazen accounting fraud, stock manipulation and money laundering’ that had occurred within the Adani Group for decades.

‘Adani has pulled off this gargantuan feat with the help of enablers in government and a cottage industry of international companies that facilitate these activities,’ added the report.

After speaking to ‘numerous sources’, the Hindenburg researchers concluded that the ‘securities regulator SEBI seems more inclined to protect the perpetrators than punish’ those involved in such corrupt practices. SEBI is the Securities and Exchange Board of India and is the capital markets regulator.

A rebuttal of the Hindenburg report issued by the conglomerate on 29 January failed to stem the rot.  All but two of the group’s entities continued to lose value on Monday, with two companies hitting the lower circuit (the limit a share can fall in value in a day before trading is suspended), and others approaching it. Some Adani stocks marginally recovered on Tuesday.

A public issue of shares by the group’s flagship company Adani Enterprises Limited seeking to raise US $2.5 billion squeaked through in its final hours, after three days of tepid interest, with the stock’s price on the open market plunging well below the offer price.

Some Adani stocks recovered slightly after the rout on India's stock exchange.

In its rebuttal, the Adani Group termed the report a ‘calculated attack on India, the independence, integrity and quality of Indian institutions, and the growth story and ambition of India’.  In response, Hindenburg wrote ‘fraud cannot be obfuscated by nationalism’ and that Adani’s ‘response largely confirmed our findings and ignored our key questions’.

The face-off between Hindenburg and Adani has resulted in an unprecedented level of global interest in the affairs of the Indian conglomerate, whose head was, prior to the report’s release, the world’s third richest man. Over the past week, Gautam Adani’s personal fortune has shrunk by more than US $30 billion and he fallen out of the top 10 in Forbes’ real-time billionaires list.

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Politicians of all persuasions call for action

On Monday 30 January, opposition politicians in India wrote to SEBI and to the country’s finance minister seeking investigations into the claims made in the Hindenburg report and alleging that the Adani Group’s rebuttal was misleading.

On 26 January, Mahua Moitra, a former investment banker turned politician and an opposition MP of the All India Trinamool Congress party from the state of West Bengal, wrote a letter to Nirmala Sitharaman, India’s minister of finance and corporate affairs, with copies to the heads of SEBI and several other regulators and law-enforcement agencies, arguing that ‘it is important that [the] nation knows the truth behind many of [the] allegations’ that the Adani Group is facing.

Calls for a serious probe into the Adani Group's corporate structure have been widespread since the Hindenburg allegations.

On 30 January, Moitra followed this up with a letter to the Madhabi Buch, SEBI’s chairperson. In this letter, she questioned an assertion made in the Adani Group’s rebuttal to the Hindenburg report, which said that allegations made in the report have been ‘tested and rejected by India’s highest courts’. She pointed to a statement made by the Minister of State for Finance, Pankaj Chaudhary, in Parliament in mid-2021, which had confirmed an ongoing investigation by SEBI into some Adani Group companies.

‘Based on the statement [in the Adani group’s rebuttal] it seems that SEBI has completed its investigation… and the Adani Group won the matter in a court with all charges dismissed or SEBI discharged them,’ her letter says.

Then the letter asks a series of pointed questions: ‘I would like to understand, when was the investigation on the matter completed? What were the findings? What action was taken? What went to court? When did it go? If the investigation is not complete, why is it taking so long? When will it be completed?’

Hindenburg alleges that investigations into the Adani Group by Indian regulatory and enforcement agencies go nowhere.

Calling the group’s statement false, the letter says ‘further, it would be expedient to take immediate corrective clarification and penal action against Adani Group for their false statement to the market participants that these allegations have been ‘tested and rejected’.’

Another opposition politician, Praveen Chakravarty, who heads the data analytics department of the Indian National Congress party (which leads the opposition in Parliament), has taken the same tack in a letter to Buch sent on Monday that AdaniWatch has exclusively accessed.

The letter asks, ‘eighteen months since [the] statement by the Finance Ministry [that Adani Group companies are under investigation by SEBI], what is the status of the investigation? If it is complete, why have the details not been made public yet? If it is not complete, why has it taken so long and when is the expected date of completion of the investigation?’

The Chakravarty letter to SEBI, obtained exclusively by AdaniWatch

The Chakravarty letter to SEBI, obtained exclusively by AdaniWatchRegarding the Adani Group’s statement that allegations against it have been tested and rejected by India’s highest courts, Chakravarty’s letter asks ‘have these allegations [regarding the tax-haven based investors into Adani stocks] reached India’s highest courts? If yes, when and which courts? … If no, this is a brazenly false statement by a publicly listed entity ahead of an offering. This is tantamount to misleading the public. What action do you propose to take against Adani group for this false statement?’

A section of supporters of the ruling party are also advocating for the government to distance itself from the Adani Group (to which Prime Minister Narendra Modi is considered to be close) and conduct investigations.

P N Vijay, a financial analyst and investment banker, who has been a member of and spokesperson for the BJP, India’s ruling party, also called for an investigation into the claims made in the Hindenburg report. Speaking to a news channel, Vijay said ‘these allegations are of a serious nature’. Vouching for Hindenburg’s credibility he said ‘Hindenburg, over the last five years, has unearthed with a 99 percent success rate major scams by companies. Two years ago, they brought down a major Chinese company, where the Chinese government’s reaction was to immediately order an enquiry by the market regulator.’

Vijay bluntly called on the government to distance itself from Adani.

‘The BJP and its supporters should stop supporting Adani because it will blow up in their face in the next few days… I would suggest that the finance minister Nirmala Sitharaman should order that SEBI conduct an enquiry into the market manipulation and that the RBI [Reserve Bank of India] and the Enforcement Directorate [a law enforcement agency that investigates foreign exchange transactions and money laundering] should investigate the allegations of money laundering.’

He added that ‘there should be no trading [of Adani stocks] for 30 days. This is normal market practice; we should follow it and not behave like a banana republic. There are millions of Indian retail investors who are affected by this stock so the government should do its duty and order an inquiry. That’s how a mature nation behaves.’

'We should not behave like a banana republic,' said P N Vijay, a financial analyst and investment banker, who has been a member of and spokesperson for the BJP.

Subramanian Swamy, a member of the BJP who completed a term as an MP in the upper house of Parliament last year and has been a long-time critic of the Adani Group, echoed Vijay’s views, writing on Twitter ‘time now in interest of BJP that Modi distances himself from Adani alleged frauds till Adani clears himself in Court. Otherwise as in Watergate scam, Republicans in 1973-79 suffered badly so too will BJP in 2024 elections. More disclosures coming.’

The issue was raised at an all-party meeting at Parliament. Such meetings precede every session of the lower house of parliament. Multiple opposition parties, including the Aam Aadmi Party (which heads the state governments in Delhi and Punjab), the two leading Communist parties (which head the state government in Kerala and are a part of the ruling coalition in Tamil Nadu), the Dravida Munnetra Kazhagam (which heads the ruling coalition in Tamil Nadu), the Bharat Rashtra Samiti (which heads the state government in Telangana) and the Rashtriya Janata Dal (which is part of the ruling alliance in the eastern India state in Bihar but opposed to the BJP in Delhi), demanded a debate in the forthcoming Budget session of Parliament on the Hindenburg report and its aftermath.

Questions for SEBI Chairperson

The Hindu Businessline has reported that Gautam Adani visited SEBI headquarters twice in four weeks in September and October 2022 and met with officials, directors and the SEBI chairperson Madhabi Puri Buch. If SEBI was already investigating issues raised against the Adani Group, its offshore entities and its transactions, wasn’t it a conflict of interest for the SEBI chairperson and directors to meet Gautam Adani? How often do the promoters of listed companies visit the SEBI office and hold meetings with the SEBI chairperson, especially when the company is under investigation by the regulator?

On 29 January 2023, the following set of questions was sent to Madhavi Buch, SEBI Chairperson, by this correspondent:

  1. Is it correct that you sought to become the Chairperson of the Securities and Exchange Board of India (SEBI) on two occasions before you became the chairperson on 1 March 2022?
  2. Is it correct that as a whole-time member of the SEBI, you led the investigations into the allegations about the activities and the role played by particular Foreign Portfolio Investors (FPIs) registered in various jurisdictions, also called tax havens, which have invested heavily in the stocks of Adani Group companies – after several media reports had appeared and a representation made by Member of Parliament Mahua Moitra?
  3. What is the current status of these investigations?
  4. What are your comments on the report published by Hindenburg Research in which several serious allegations have been levelled about Adani Group companies, including allegations on related-party transactions?
  5. It was reported that, in May 2022, SEBI had sought clarification from the Adani Group about the 17 offshore entities involved in the group’s acquisition of Ambuja Cements and ACC from Holcim. Please let me know if the Adani Group has submitted any clarifications and satisfactory evidence.
  6. Did SEBI initiate a probe into the offshore funds based out of Mauritius and other tax havens that have substantial holdings in the listed companies of the Adani Group?
  7. Has SEBI received any responses from the authorities in the jurisdictions where the funds are domiciled? Has SEBI sought the intervention of the Union government and its agencies to gather the required information?
  8. It has been reported that Adani Group Chairman Gautam Adani visited the SEBI headquarters in Mumbai twice in September 2022 and October 2022. It has been further reported that Mr Adani had a meeting with you. Is this information correct. If yes, is it normal practice and appropriate for the head of a listed company, that was about to embark on a public share price offering, to meet top officials, including Directors and the Chairperson, of SEBI when the Board is investigating allegations of malpractices and possible illegalities against entities headed by this person?
  9. It is more than a year and half since SEBI has been investigating the legality of the activities of certain FPIs that have invested in publicly listed companies in the Adani Group. When are these investigations expected to be completed?
  10. What is SEBI’s reaction to the media statement made by the Adani Group that the allegations contained in the Hindenburg Research report are ‘a malicious combination of selective misinformation and stale, baseless and discredited allegations that have been tested and rejected by India’s highest courts (emphasis mine).’


No response had been received at the time of publication. This article will be updated with any responses that arrive.

Meanwhile, large investors and creditors of the Adani Group, including the Life Insurance Corporation (LIC) of India and the State Bank of India (SBI), both government owned core financial institutions in the country, were reported to be examining the allegations made by the Hindenburg report.

While the LIC released a public statement seeking to reassure its investors about its large investment into Adani Group companies, its managing director told Reuters that ‘we have the right to ask relevant questions and we will definitely engage with them [Adani group]… We will engage with them in a day or two and seek their views and clarification.’

A government bank official told the Indian Express ‘we are definitely going to look at our exposure (to Adani Group) and see how secure we are and what kind of impact it may have. It may be premature to allude to something right now, but we are watching the situation closely.’