Why has it taken Hindenburg’s report for SEBI to get into action now? What was SEBI doing before?
Weeks after the much-talked-about Hindenburg Research published its report, SEBI now has finally shown up to look into the matter. The Securities and Exchange Board of India (SEBI) is the regulatory body of India for the securities and commodity markets. It lies under the Ministry of Finance within the Government of India.
The body is expected to look into the allegations made by the Research and do its paperwork from the start. SEBI, as quoted by the source, will be examining “any possible price manipulation of Adani group stocks, as well as examining possible irregularities in the $2.5 billion share sale of the flagship firm Adani Enterprises” as of 30th January.
This step up, even though encouraged, is also questioned by many. Being an Indian regulatory body responsible for managing the stock exchange while keeping a close eye on any corrupt practices, failed to signal any irregularities in the operations of Adani enterprises. After the damaging allegations by Hindenburg’s report, there was a significant fall in the shares of the Adani group in India as well as in the special economic zone. After taking this hit, the Enterprise has called off its Follow on Public Offer (FPO) to return the investor’s money.
The primary focus of SEBI is to look into the rout of $86 billion of Adani shares. The work will be more or less focused on the Hindenburg report and the questions and allegations mentioned. The regulatory body will be scrutinizing the manipulation and unethical practices conducted by Adani’s seven key companies.
With the market closing on Wednesday, the stocks of Adani enterprises have plunged to 28%, losing almost $18 billion, marking an all-time low. Gautam Adani, founder, and chairman of Adani Group has now slipped down to the 15th position in the Forbes List of Billionaires (real-time).
August 2022 saw Gautam Adani, an Indian industrialist, the 3rd richest man in the world trailing SpaceX’s Elon Musk and Amazon’s Jeff Bezos. To have been crowned, representing the nation and South East Asia, he has been diligently active for the past few decades. In the last two years, the industrialist saw a meteoric rise in his business which went up to 900% in net worth. Similarly, with an evident fall in overall net worth, he no longer can be seen on the list of top ten in the world.
Hindenburg’s report, published on 24th January 2023, accused the Indian industrialist Gautam Adani and the Adani enterprise of manipulation, unethical practices, and irregularities in his financial books. The report called him out and labeled him as a ‘con’ raising 88 questions in response to which the Enterprise published a 413-page reply addressing the Research’s report and blaming them for damaging the reputation of not only the founder and chairman but also trying to portray a bad image of India as a country itself.
The accusations are being exchanged every other day since the report published between the Adani group and Hindenburg Research. Given the credentials and track record, the report is said to be legitimate and is considered a serious basis for further investigations.
SEBI who got motivated right after the report disrupted the Indian stock exchange market, has been looking into the allegations made. Simultaneously, an expert told ANI “Let us wait for its report that will make it very clear what is what” in context to the operations undertaken by the regulatory body. Each day
a closer eye is kept by SEBI to monitor the established decorum of working so that a very thorough report can be produced from the side of the Indian regulatory body given the allegations.
Strict scrutiny has been conducted for the last few days, but the authorities have yet to produce any relevant reports. The loss suffered due to the steep decline of Adani shares is not only limited to the seven key companies under the flagship of the Adani enterprise but a huge loss is suffered by the investors as well.
On one hand, we saw Adani group losing around $18 billion as of now, there was also huge damage of ₹16,580 Crore within two days due to a grave bloodbath prevailing in the Indian share market. Stock market expert D.K. Mishra said in his interview with Mathru Bhumi, “As far as LIC (Life Insurance Corporation of India) is concerned, it is a systematic investor group. LIC is not the kind of institution that has invested suddenly or at a high price. Institutions like LIC enter the market on a very sustained basis regularly.”
The Indian regulatory body, SEBI has a very core and basic responsibility to ensure that safe, smooth, and ethical practices are being conducted while dealing with shares and bonds. Failing to do so has raised many eyebrows as to why the misconduct by the Adani group could not be alerted by the authorities.
As the report claimed that the fraud had been going on for decades now, right under the nose of all the regulatory bodies and other government entities, why is that it wasn’t uncovered until the Hindenburg Research’s report? All such questions are now being legitimately raised. The faulty administration has completely disrupted the stock market and comes off as irresponsible towards its very primary duties.
The Securities and Exchange Board of India is being accused of neglect towards its basic duties and is now expected to prepare a detailed report after scrutinizing the operations of Adani Group. The group has constantly been denying all the allegations made by the Hindenburg Research but the repercussions are now far too evident to be ignored. Although there no official statement is released yet
from the spokesperson of the Adani group or SEBI regarding their role in scrutinizing the points raised by Hindenburg.
Not only SEBI but also another regulatory body, the Reserve Bank of India (RBI) has also stepped into this crusade of irregularities and asked the banks of the nation to submit a very detailed report regarding the debt subscribed to the Adani group.
All these moves that are seen actively can be taken into account as a ‘Hindenburg effect’. There is a hint of vigorous working by the authorities who can be said to be trying to save faces. It cannot be denied at all that there has been constant neglect from the side of authorities and now that the Hindenburg report has happened to uncover dirt from the decades, they are trying to get on board in an attempt to save their seats.
Opposition can also be seen attacking the NDA government for irresponsible behavior and indifference to primary duties by SEBI and RBI. Although there is no official statement or report submitted of any kind by SEBI, the Reserve bank of India has come forward and given clear instructions to the banks to scrutinize the debts given to the Adani group and prepare a very detailed and thorough report on
the same.
“Some banks have indicated that their exposure to the group is well below their prescribed exposure limits. We note that PSU banks have seen a large increase in their foreign loan book in recent quarters but a meaningful portion of the incremental loans appears to be directed toward financing the sharp increase
in working capital needs of OMCs,” said Kotak Institutional Equities in its latest note.
SEBI is yet to release an official statement on its report and finding of the manipulation and irregularities of Adani stocks. They should also justify why they hadn’t been able to raise alarm until Hindenburg Research published its report.
edited and proofread by nikita sharma
