Adani Update: Hindenburg Detailed Response to SEBI’s Actions

Introduction:

In response to our detailed report on the Adani Group’s alleged financial misconduct, the Securities and Exchange Board of India (SEBI) has issued a Show Cause Notice challenging the integrity and methodology of our investigation. Our report, which exposed a complex web of stock manipulation and accounting fraud, has triggered significant reactions, including the resignation of Deloitte as Adani Ports' auditor and widespread media scrutiny. Here, we provide a detailed response to SEBI’s notice, addressing their concerns and reinforcing the validity of our findings.

SEBI’s Show Cause Notice:

SEBI’s 46-page notice highlights several key issues with our report. We address each point below:

1. Allegations of Sensationalism: SEBI has criticized our use of terms like “scandal” and “fraud,” arguing that such language might be sensationalist. Our intention was to accurately represent the severity of the financial discrepancies and manipulations discovered. The term “scandal” reflects the public interest and the magnitude of the issue, aligning with common practices in investigative journalism to convey the gravity of corporate misconduct.

2. Discrepancies and Omissions: SEBI has noted minor discrepancies in our legal references and financial data. While we acknowledge that some details may have been inadvertently omitted or misrepresented, these errors do not undermine the core findings of our report. We maintain that the substantial evidence of stock manipulation and accounting fraud remains robust, and minor corrections do not alter the fundamental issues raised.

3. Questioning Our Methodology: SEBI has raised concerns about our methodological approach, specifically the use of quotes from a broker previously banned by the regulator. We clarified that the broker’s status was disclosed transparently and that the information provided was corroborated by multiple independent sources. Our methodology was designed to ensure thoroughness and accuracy, and the broker’s quotes were a part of a broader evidential framework.

4. Technical Disclaimers and Objectivity: SEBI has critiqued our disclaimers about objectivity and our short position in Adani stocks. We included these disclaimers to maintain transparency and avoid any perception of bias. Our short position was clearly stated, and we believe this transparency strengthens our credibility rather than detracts from it.

Independent Media Investigations:

Since the release of our report, a plethora of independent media investigations have validated and expanded upon our findings:

1. January 2023: NewsDrum and Forbes highlighted Adani’s failure to disclose significant shareholder activities, corroborating our findings on transparency issues.

2. February 2023: The Guardian, Financial Times, and Bloomberg reported on stock manipulation tactics and dubious offshore transactions, aligning with our observations.

3. March 2023: Investigations revealed accounting irregularities in Adani’s coal projects and related entities, reinforcing our claims of financial misconduct.

4. April - December 2023: The Wall Street Journal and Bloomberg continued to report on undisclosed related-party transactions, further supporting the allegations of financial impropriety.

SEBI’s Regulatory Actions:

SEBI’s response to our report has included both actions and inactions that have raised questions:

1. Pressure on Brokers: SEBI’s intervention to force brokers to close short positions in Adani stocks led to a buying spree that temporarily stabilized prices. This action has been criticized as a move to protect Adani rather than address the underlying issues of fraud.

2. Public Commitment vs. Investigation Findings: Despite SEBI’s public commitment to investigate, its subsequent findings have been minimal and largely focused on minor infractions. This discrepancy between commitment and action has been a point of contention among stakeholders and critics.

Conclusion:

Our investigation into the Adani Group has been a significant endeavor to uncover corporate misconduct and ensure accountability. The detailed response to SEBI’s notice reaffirms the validity of our findings and our commitment to transparency. The continued support from independent media and the broad resonance of our report underscore the need for robust regulatory oversight and corporate integrity.

We stand by the integrity of our investigation and will continue to advocate for transparency and accountability in the financial sector.

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Article Compiled by:-

~Mayank Garg

(LegalMantra.net Team)

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