Short-seller Hindenburg attacks Indian securities regulator

In a report last week, Hindenburg Research, a small New York short-seller firm that gained fame for its exposure of India’s Adani Group last year, alleged that the head of India’s securities regulator had a conflict of interest with Adani Group that prevented her from conducting a government investigation into the conglomerate. Citing leaked emails, Hindenburg alleged that Madhabi Puri Buch, who has served as chairwoman of the Securities and Exchange Board of India (SEBI) since March 2022, had multi-layered offshore investments linked to the Adani family.

Specifically, Buch invested in 360 ONE WAM, a wealth management group in Mumbai, which gave her direct exposure to Adani shares. In addition, Buch and her husband have stakes in offshore Mauritius shell companies that have links to Vinod Adani, the older brother of Adani Group founder and CEO Gautam Adani, Hindenburg said. Reuters subsequently published documents showing that Buch earned income from Agora Advisory Private Limited, a consulting firm in which she owns 99 percent, potentially violating SEBI rules.

In January 2023, Hindenburg released an explosive report accusing Adani Group of the “biggest corporate fraud in history,” which included stock manipulation and accounting fraud. Hindenburg found 38 shell companies in Mauritius run by Adadi Group CEO Gautam Adani’s older brother, Vinod Adani. Also in the original report, a short seller revealed that he had taken a short position in Adani Group — a standard strategy for short sellers. Hindenburg’s bet paid off when Adani Group shares fell more than 60 percent in the weeks following the report’s release. While Adani Group’s total market capitalization has since recovered, some subsidiaries, such as Adani Gas, have yet to regain their pre-Hindenburg levels.

Buch’s latest disclosure by Hindenburg comes in response to SEBI sending a show-cause notice to Hindenburg, arguing that the short seller had exaggerated facts and misled investors, including by failing to properly disclose that he had been in Adani Group for a short period and stood to benefit from the disclosure. On July 1, Hindenburg released a report disputing all of SEBI’s claims and made the show-cause notice public. The company argued that “almost everyone on Earth knew that we were (shorting) Adani because we had clearly and repeatedly disclosed that.”

Since Hindenburg released its report on Buch last week, members of the Indian Congress have called on her to resign. A BJP spokesman, speaking on behalf of Prime Minister Narendra Modi’s party, called the allegations against Buch baseless. Buch insists she has made all the necessary disclosures, which have been confirmed by SEBI and Institutional Investor Advisory Services, a proxy advisory firm in India. Buch, Adani Group, 360 ONE WAM and SEBI deny any wrongdoing. Shares of Adani Group, listed on the Indian Stock Exchange, fell 1 percent on Aug. 10, the day Hindenburg released its report, wiping out $2.4 billion in market capitalization. The stock has since rebounded.

Adani’s meteoric rise from relative obscurity just 15 years ago to becoming a dominant force in the Indian economy is nothing short of remarkable. This rapid growth has been fueled by a relentless series of acquisitions, mostly orchestrated by Adani Enterprises, the conglomerate’s flagship incubator. Once these acquisitions mature, they are spun off into independent entities. Adani Group has been making an average of two acquisitions per year for the past three years. Based in Gujarat, Adani Group also has a close connection to the political trajectory of former Gujarat Chief Minister Modi, who rose to become India’s prime minister, further solidifying Adani’s influence and reach.