Market regulator Securities and Exchange Board of India (SEBI) has said that it may use Hindenburg report for its own probe into Adani Group’s offshore fund holdings, said a report on Friday.
It said that it will study the report issued this week by short-seller Hindenburg Research for its ongoing preliminary investigation into the group’s foreign portfolio investors. A Reuters report on Friday said that the market regulator has increased scrutiny of deals undertaken by the Adani Group over the past year, and now it wants to study the Hindenburg report for its probe.
“SEBI has been increasingly examining all the transactions that Adani Group has been undertaking in the listed space,” said one of the two sources, who declined to be identified as the matter is confidential, the Reuters report noted. SEBI has been increasingly asking for disclosures that it ordinarily does not.
On Wednesday, Hindenburg Research published a scathing report that mentioned that the Indian conglomerate is involved in improper use of offshore tax havens and flagged concerns about high debt. The report triggered panic selling on Wednesday that eroded the cumulative market capitalisation of seven listed Adani Group companies by around Rs 1 lakh crore. The rout even continued on Friday. Adani group lost Rs 2.37 lakh crore from the group market capitalisation since Wednesday.
Adani Total Gas, the most valued group stock, saw its m-cap falling by Rs 76,000 crore in two days; Adani Transmission saw its m-cap plunging by Rs 63,700 crore. These two Adani group stocks were heavily battered in Friday’s trade, tanking up to 15 per cent.
When asked about the probe into Adani group companies, SEBI spokespersons refused to comment on the specifics noting that they do not discuss company-specific matters and ongoing probes.
In the case of Adani Group’s acquisition of Switzerland-based Holcim Ltd’s stake in India’s Ambuja Cements Ltd and ACC Ltd, the regulator examined the offshore special purpose vehicle (SPV) used for the transaction, the first source said.
The use of this SPV was disclosed by the group as part of the acquisition announcement in May 2022. The regulator had found as many as 17 foreign offshore entities involved in the funding of the transaction.
The regulator had sought clarity from the group on these entities when the group approached it for regulatory clearance last year. These responses are under regulatory examination, sources said.
Hindenburg’s report was published on a day when Adani Enterprises’ Rs 20,000-crore follow-on public offering (FPO) was to open for anchor investors. The follow-on public offer (FPO) kicked off on Friday instead of Wednesday.
Initially reacting to the report, the Adani Group said that the Hindenburg Research report is a “malicious combination of selective misinformation and stale, baseless and discredited allegations”. It said that the report was an attempt to damage the conglomerate’s upcoming FPO.
Adani Group Chief Financial Officer Jugeshinder Singh, in a statement on behalf of the conglomerate, said: “We are shocked that Hindenburg Research has published a report on 24 January 2023 without making any attempt to contact us or verify the factual matrix. The report is a malicious combination of selective misinformation and stale, baseless, and discredited allegations that have been tested and rejected by India’s highest courts,” said Singh.
On Thursday, Adani Group said that it will be evaluating “remedial and punitive action” against Hindenburg, calling the report “maliciously mischievous, [and] unresearched”.
In a statement by Jatin Jalundhwala, Group Head – Legal, Adani, said the volatility in Indian stock markets created by the report is of great concern. It also said that short-seller Hindenburg will benefit from a slide in Adani shares. “The maliciously mischievous, unresearched report published by Hindenburg Research on 24 Jan 2023 has adversely affected the Adani Group, our shareholders and investors. The volatility in Indian stock markets created by the report is of great concern and has led to unwanted anguish for Indian citizens,” the statement said.
Hours later, Hindenburg on Thursday said that it will demand documents in the legal discovery process if Adani Group files a lawsuit in the US against the short seller for its report on the ports-to-power conglomerate.
The US-based short-seller on Thursday said that the Adani Group has failed to raise any substantive issue it has noted in its report in the last 36 hours. The report accused the conglomerate of money laundering and siphoning off of funds.
“In the 36 hours since we released our report, Adani hasn’t addressed a single substantive issue we raised,” Hindenburg Research said on Twitter. “At the conclusion of our report, we asked 88 straightforward questions that we believe give the company a chance to be transparent. Thus far, Adani has answered none of these questions.”
Hindenburg Research, which has a track record of unearthing corporate wrongdoings and placing bets against the companies, in a tweet on Thursday evening said that the report has asked 88 “straightforward questions” from the Adani Group, which gives it a fair chance to come clean.
It said that the conglomerate hasn’t answered any of its observations. It noted that the conglomerate has “resorted to blusters and threats” instead of replying to its claims.
Our response to Adani: pic.twitter.com/6NcFKR8gEL
Also read: Adani Group says it is ‘shocked’ at Hindenburg report; says it’s an attempt to damage upcoming FPO
Also read: Adani Group engaged in stock manipulation, accounting fraud over decades: Hindenburg report