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US-based short seller Hindenburg Research stated that it was issued a "show cause" notice by the Securities and Exchange Board of India (Sebi) on June 27, detailing suspected breaches of Indian regulations. Hindenburg alleged that Sebi began supporting the Adani Group shortly after the release of its January 2023 report, based on information gathered from discussions with sources in the Indian market, as mentioned in a blog post on Tuesday.
"We learned that Sebi allegedly exerted pressure on brokers behind the scenes to close short positions in Adani, leveraging the threat of costly and prolonged investigations. This tactic effectively bolstered buying activity and established a price 'floor' for Adani’s stocks during a critical period."
The company indicated that after the Supreme Court directed Sebi to investigate the allegations last year, the regulator appeared to agree with "several crucial findings" of their report.
"Subsequently, Sebi claimed it was unable to pursue further investigation," the statement said.
It further noted that last month, Jugeshinder Singh, Chief Financial Officer of the Adani Group, referred to certain regulatory notices directed at the group as "insignificant".
"This confidence may partly stem from Adani’s interactions with Sebi," it added, mentioning that Gautam Adani met Sebi Chairperson Madhabi Puri Buch twice in 2022.
Hindenburg Research stated that it intends to file a Right to Information (RTI) application "to obtain the identities of Sebi employees involved in both the Adani and Hindenburg cases, along with basic information regarding meetings and communications between Sebi and Adani and its representatives."
"We will await Sebi's response regarding its willingness to provide fundamental transparency in its investigations," the statement added.
In its 46-page notice included in the post, Hindenburg accused Sebi of asserting that their January report "contained certain misrepresentations/inaccurate statements" designed to "mislead readers."
"From our perspective, Sebi has failed in its duty, appearing to do more to shield those committing fraud than to safeguard the investors being harmed by it," Hindenburg remarked.
Hindenburg also noted having one investor partner in their Adani "thesis."
"We have generated $4.1 million in gross revenue from gains linked to Adani shorts through that investor relationship," the statement concluded.