Adani-Hindenburg Row: Probe in Gautam Adani-Backed Firms Nearly Over, Sebi Submits Report To SC

Adani Group and Hindeburg's row is one of the most high-profile cases in 2023 that market regulator Sebi has been investigating. On August 25, the watchdog submitted a probe report into billionaire Gautam Adani-backed firms to the Supreme Court before the extended deadline could near. Sebi has submitted findings of 22 out of 24 investigations that it carried into the port-to-power empire, while it awaits data from external agencies for the remaining two probes. Sebi has said the investigation has nearly reached its finality in the Adani Hindenburg case.

Of the 24 investigations, Sebi said 22 of them are final in nature, while 2 are interim.

As per the Reuters report, Sebi examined 13 Adani group dealings for possible violations of related-party transaction rules. Also, its investigation of some offshore deals covered 12 foreign portfolio investors who were public shareholders of Adani group companies.

However, Sebi further explained that since these foreign entities are situated in tax haven jurisdictions, it has become challenging to establish the economic interest of 12 FPIs shareholders. Hence, Sebi has sought information from five foreign countries on the matter.

Sebi assured the apex court that it would take appropriate action based on the outcome of the investigations.

Earlier, on August 14, Sebi asked for more than 15 days for its report on the Adani-Hindenburg row. Sebi has given its probe report in less than 12 days.

Gautam Adani's conglomerate came under the radar of the Supreme Court after a US-based short seller Hindenburg Research dropped a staggering report accusing the group of various allegations. The short seller's report which came in late January led to a more than $100 billion market rout, severe volatile market conditions, protests from oppositions and Sebi's investigation.

Four public interest petitions were filed at the Supreme Court against Adani Group, demanding directions related to allegations made by Hindenburg against the billions of dollars worth conglomerate. The move was also to come up with directions that could protect investors from such routes.

In March, SC had asked Sebi to look into the matter and find out if any breaches and possible price manipulations were done by the group that violated the existing law.

In the mind-boggling report that was launched like a thunderbolt on financial markets, the US-based short seller accused the Adani Group of engaging in a brazen stock manipulation and accounting fraud scheme over decades. However, Adani Group has continued to deny these allegations.

After 2-years of investigation, Hindenburg's report dated January 24, 2023, revealed that Gautam Adani, Founder and Chairman of the Adani Group, has amassed a net worth of roughly $120 billion, adding over $100 billion in the past 3 years largely through stock price appreciation in the group's 7 key listed companies, which have spiked an average of 819% in that period.

Hindenburg's report also highlighted that publicly listed companies in India are subject to rules that require all promoter holdings (known as insider holdings in the U.S.) to be disclosed. Rules also require that listed companies have at least 25% of the float held by non-promoters to mitigate manipulation and insider trading. 4 of Adani's listed companies are on the brink of the delisting threshold due to high promoter ownership.

"Our research indicates that offshore shells and funds tied to the Adani Group comprise many of the largest "public" (i.e., non-promoter) holders of Adani stock, an issue that would subject the Adani companies to delisting, were Indian securities regulator SEBI's rules enforced," Hindenburg's January 24th report said.

In the overall trading week that ended on August 25th, the conglomerate's flagship firm Adani Enterprises dipped by 5%, while Adani Ports shed 5.40%. Also, Adani Green's weekly drop is nearly 5%. Further, Adani Total Gas and Adani Energy Solutions dived by over 2.5% and 3.6% in the week, and somewhat similarly Adani Wilmar's stock fell 4.1%. Its major cement stock Ambuja Cements also dipped 5%, while media stock NDTV plunged 3.2%. Adani Power and ACC are the only stocks of the group that gained by 2% and 1% in the week on BSE.