Short-seller Hindenburg after Sebi announcement

By PR Sanjai

Hindenburg Research criticized India’s market regulator for failing to address the fraud it exposed in a report on Adani Group early last year. The research firm said it had only made a profit of more than $4 million in the short-selling situation that led to a huge market decline for the conglomerate.

Securities and Exchange Board of India, or Sebi, “seems more interested in prosecuting those who expose such practices” as its investigation into billionaire Gautam Adani’s empire has hit a brick wall, the US short-seller said in a statement on its website on Monday. It had received a notice from Sebi in June saying that its damning January 2023 report on the Adani Group contained certain misrepresentations and inaccurate statements that were intended to mislead readers.

The shocking report generated gross revenue of about $4.1 million through profits related to Adani shorts from “one investor relationship” — it did not name who — and about “$31,000 through our own shorts on Adani U.S. bonds,” Hindenburg said in the July 1 statement.

Hindenburg alleged last year that the ports-to-energy conglomerate had committed widespread misconduct, calling it “the biggest fraud in corporate history.” Despite Adani Group repeatedly denying Hindenburg’s allegations, the ensuing stock rout at one point wiped out more than $150 billion in market value from its listed companies. Adani Group has since recouped most of the stock losses.

‘Kotak mask’

Sebi’s notice “conspicuously failed to mention the party with real ties to India: Kotak Bank”, which created and oversaw the offshore fund structure used by Hindenburg’s investment partner to bet against Adani, Hindenburg said. The regulator “hid the name ‘Kotak’ with the acronym ‘KMIL’”, it added.

KMIL refers to Kotak Mahindra Investments Ltd., the asset manager.

“SEBI has neglected its responsibilities and appears to be doing more to protect those who commit fraud than to protect the investors who fall victim to it,” Hindenburg said in the statement.

The Indian market regulator did not immediately respond Bloomberg‘s request for comment. Representatives of Kotak and the Adani Group did not immediately respond to requests for comment.

Following Hindenburg’s Adani report, the Supreme Court of India directed Sebi to investigate the allegations and set up an expert panel to look into regulatory lapses.

In January this year, the Supreme Court had asked the Sebi to complete the probe within three months and said no further investigations were required.

Hindenburg’s latest attack comes as India’s newly formed opposition parties criticize Prime Minister Narendra Modi for crony capitalism and favoring billionaires like Adani and Mukesh Ambani over the rest of the citizenry in a heated showdown in parliament this week.