India's markets regulator, the Securities and Exchange Board of India (SEBI), has issued a show cause notice to Hindenburg Research, accusing the US firm of engaging in "unfair trade practices" in relation to its 2023 report on the Adani Group.
The notice, dated June 26, charges Hindenburg with "deliberately sensationalising and distorting certain facts" and alleges collaboration with a New York hedge fund to profit from the release of the report.
Hindenburg Research, which has publicly shared the notice on its website, described SEBI's actions as "nonsense" and an attempt to "silence and intimidate" those exposing corruption. The firm stated that it made approximately USD 4.1 million from its declared positions on Adani stocks, and criticized SEBI for not focusing its investigation on the evidence presented in the January 2023 report.
Hindenburg's report had claimed that the Adani Group created a "vast network of offshore shell entities" and moved billions of dollars "surreptitiously" between public and private entities.
The US-based research firm argued that SEBI's notice wrongly targeted it while failing to address the involvement of Kotak Mahindra Investments Ltd (KMIL), which Hindenburg claims facilitated the offshore fund structure used by its investor partner to bet against Adani. SEBI's notice, however, referred to KMIL under the acronym "KMIL" without directly naming it.
Hindenburg admitted to sharing its report with Kingdon Capital before its public release, which led to a massive drop in the market value of Adani group stocks, erasing over USD 150 billion at their lowest point. Despite this, most of Adani's stocks have since recovered.
Hindenburg, in its defense, highlighted the extensive two-year investigation behind its report and criticized SEBI for focusing on the wording of the report rather than addressing the substantive allegations against the Adani Group.
The firm reiterated its stance that its work on Adani was driven by a commitment to expose corruption rather than financial gain.
The Supreme Court of India, following the release of the Hindenburg report, had directed SEBI to investigate the allegations and set up an expert panel to examine regulatory lapses. The panel did not find any adverse evidence against Adani, and the apex court declared that no further probe beyond SEBI's was required.
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