Hindenburg Report on Adani: Interpretation and Analysis

Around a year and a half ago, Hindenburg Research, a U.S. firm that specializes in short-selling, raised concerns about potential wrongdoing and stock price manipulation within the Adani group of companies. Recently, on August 10, 2024, they made new accusations, this time targeting the head of India’s stock market regulator, SEBI, who is overseeing the investigation into these issues.

Hindenburg Research, based on information from a whistleblower, has accused SEBI’s chairperson, Madhabi Puri Buch, and her husband, Dhaval Buch, of being linked to offshore entities in Bermuda and Mauritius. These entities are allegedly connected to what Hindenburg describes as a “money siphoning scandal” involving the Adani group. They also claim that just weeks before Madhabi Puri Buch became a full-time SEBI member in 2017, her husband reached out to a fund administrator in Mauritius, requesting to be the only person authorized to manage certain accounts.

Buch dismissed the allegations in the report, calling them baseless.

On Sunday, Buch stated that all necessary disclosures and recusals had been properly followed. He also mentioned that the investments in the fund mentioned in the Hindenburg report were made back in 2015, two years before he joined SEBI.

India’s market regulator also urged investors to stay calm and be careful before reacting to reports like the one from Hindenburg. The regulator added that SEBI has thoroughly investigated the allegations against the Adani group, completing 23 out of 24 investigations by March 2024.

Adani Crash in January 2023

On January 24, 2023, Hindenburg Research released a critical report accusing the Adani Group of financial misconduct and stock manipulation. This report led to a significant drop in the stock prices of Adani Group companies, with some stocks falling by as much as 83 percent.

Adani Enterprises

After the report, the stock plummeted to ₹1,017, a 70 percent decline. It wasn’t until May 23, 2024, that it regained its pre-report levels. As of August 9, 2024, Adani Enterprises’ shares are trading at around ₹3,188, still about 6 percent below their price before the report.

Adani Wilmar

Adani Wilmar has continued to struggle, with its stock price dropping from ₹573 to ₹286, a 50 percent decrease. The stock has not yet fully recovered, currently trading at ₹385, which is still about 33 percent below its pre-decline level.

Adani Power

This stock saw a 52 percent drop, falling from ₹275 to ₹132. However, it has more than doubled since the report was released.

Adani Ports

Following the report, Adani Ports’ stock dropped to a low of ₹395, marking a 48 percent decline. It took 119 days to recover to its pre-report level, which it achieved on May 23, 2023. As of August 9, 2024, the stock is trading at ₹1,534, reflecting a 101 percent increase from the price at the time of the report.

Adani Energy Solutions

The stock of Adani Energy Solutions experienced a 77 percent drop from ₹2,726 to ₹632. Although it has partially recovered to ₹1,104, it remains 60 percent below its level before the report, indicating that the stock is still significantly affected.

Adani Green Energy

Adani Green Energy’s stock fell from ₹1,917 to ₹485, a 75 percent drop after the report. After 379 days, the stock managed to return to its pre-report levels on February 7, 2024.

Adani Total Gas

Adani Total Gas was the hardest hit, with its stock price plunging from ₹3,892 to ₹650, an 83 percent decline. Although it has seen some recovery, the stock is currently trading at ₹870, still about 78 percent below its pre-report level. This slow recovery highlights the ongoing challenges the company faces.

Hindenburg Allegations on SEBI Chief

On Saturday, August 10, Hindenburg Research published a blog report accusing SEBI Chairperson Madhabi Buch and her husband, Dhaval Buch, of having secret investments in offshore funds based in Bermuda and Mauritius. According to Hindenburg, these funds were allegedly used by Vinod Adani to move money out of the Adani Group.

Hindenburg, using documents provided by a whistleblower, claimed that Madhabi and Dhaval Buch had stakes in these offshore funds through complicated arrangements. The report also stated that just weeks before Madhabi Buch became a full-time SEBI member in 2017, Dhaval Buch contacted a fund administrator in Mauritius, asking to be the only person allowed to manage certain accounts.

In January 2024, the Supreme Court decided not to hand over the investigation into stock price manipulation allegations against the Adani group to a Special Investigation Team (SIT). Instead, the Court instructed SEBI to finish its investigation into two pending cases within three months. Earlier this year, the Supreme Court also rejected a plea that asked for a review of the decision and called for SEBI to investigate the Adani-Hindenburg case further.

Adani’s Take on the Allegations

In a statement dated August 11, the Adani Group informed the stock exchange that its international holding structure is completely transparent, with all necessary information regularly shared in public documents. The group made it clear that they have no business connections with the people or issues mentioned in what they believe is a deliberate attempt to damage their reputation.

The Adani Group described the latest claims by Hindenburg Research as harmful, misleading, and a misuse of publicly available information to draw conclusions that serve their own interests, without regard for facts or the law.

The company emphasized that it remains fully committed to being transparent and following all legal and regulatory rules.

Madhabi Buch’s Take on the Allegations

SEBI Chairperson Madhabi Puri Buch has admitted to having an investment in a Bermuda/Mauritius fund structure, according to Hindenburg Research. Following this, Hindenburg is now calling for her to reveal the full list of clients that her consulting firms in Singapore and India have dealt with.

This statement from Hindenburg came just hours after Buch and her husband issued a response, describing Hindenburg’s latest allegations as an attack on SEBI’s credibility and a personal smear campaign. Hindenburg, in a series of posts on X (formerly Twitter), highlighted that Buch’s response included some key admissions and brought up several new critical questions that need answers.

Conclusion – My POV

The situation with SEBI Chairperson Madhabi Puri Buch and the claims made by Hindenburg Research is quite serious. It raises important questions about transparency and the role of regulators. Hindenburg’s accusations suggest potential conflicts of interest, which could damage the trust people have in SEBI if not properly addressed.

From my point of view, it’s important that anyone in a position like Buch’s is completely open about their financial dealings to keep public trust. Buch’s acknowledgement of her investment and Hindenburg’s call for more information only add to the need for clear answers.

In simple terms, this situation shows how important it is for leaders in regulatory roles to be transparent. If Buch provides full and honest answers, it could help maintain confidence in SEBI and the market as a whole. How this matter is handled will be key to keeping trust in these institutions.