On Monday, the Adani Group companies experienced a significant drop in market value, losing as much as $19 billion, following allegations by Hindenburg Research that the Indian market regulator investigating the group had links to offshore funds also used by Adani. The flagship firm, Adani Enterprises, fell 2% in morning trade, while other companies in the group also saw losses ranging from 2% to 4.5%. This caused Adani Enterprises and Adani Ports to be among the biggest losers on India’s blue-chip Nifty 50 index, with total losses in Adani companies narrowing to $9 billion after the initial drop.
Hindenburg Research, a New York-based short seller, made allegations in January 2023 regarding improper use of tax havens and stock manipulation by the Adani Group, causing a $150 billion rout in Adani company shares. Short sellers profit from betting on share value declines, and Hindenburg reportedly made $4.1 million in this case. Adani denied all allegations and most of his company shares have since recovered. However, an investigation by the Securities and Exchange Board of India (SEBI) is ongoing, following the initial upheaval caused by Hindenburg’s allegations.
On Saturday, Hindenburg reported, based on whistleblower documents, that SEBI Chair Madhabi Puri Buch and her husband had stakes in an offshore fund where a substantial amount of money was invested by associates of Vinod Adani, brother of Gautam Adani. Adani addressed the fresh allegations on Sunday, stating that its overseas holding structure was transparent. SEBI urged investors to remain calm and conduct due diligence before reacting to such reports. The original 2023 Hindenburg report prompted an inquiry by SEBI, which Buch currently heads, and the investigation is still ongoing.
Despite Buch stating that Hindenburg’s allegations were baseless and Adani rejecting the fresh accusations, Hindenburg expressed distrust in SEBI as an impartial arbiter in the Adani matter. The allegations against the Adani Group have been investigated by SEBI, as per the regulators’ statement. India’s Supreme Court ordered SEBI to expedite its investigation in January and ruled out the need for further probes into the group. The recent allegations against Buch have unsettled retail investors and analysts anticipate a short to medium-term negative impact on Adani stocks, especially as retail investors are influenced by accusations against SEBI.
The allegations against SEBI have attracted political attention, with opposition leader Rahul Gandhi questioning the integrity of SEBI and criticizing the regulator’s chairperson. India’s economic affairs secretary, Ajay Seth, commented that the regulator and the concerned individual have made statements, and the government has no additional comments. Despite the reassurances from Adani and SEBI, concerns linger among investors and analysts regarding the impact of the allegations on Adani Group companies and the perceived integrity of the regulatory process in India.
