Adani’s investors Knock The Door Of SC To Seek Compensation For The Firm’s Stock Crash

The investors of Adani Enterprises have filed a complaint in the Supreme Court to prosecute “short seller” Nathan Anderson of the US firm Hindenburg Research and his associates in India. It is against the US for allegedly exploiting innocent investors, and “artificially crashing” Adani Group shares and market value. Hindenburg is basically involved in selling borrowed shares with the hope of buying them later at a lower price. If prices fall to expected lines, short sellers make a killing.

It is a research firm run by investments and writes usually on mismanagement of firms, irregularities, and doubtful party transactions. The public interest litigation (PIL) filed by advocate ML Sharma also seeks directions to declare short selling as an offense of defrauding investors and to be prosecuted under IPC via section 420. He also informed the PTI that the PIL submitted by him is now recorded and numbered in the apex court registry.

About The Complaint Filed By Adani’s Investors

The PIL seeks the court’s directions to register an FIR, reinstate the turnover of the short sellers, prosecute them to protect the citizens of India, and take further action against them for cheating innocent investors and manipulating the Indian market. In his petition, Sharma said that the SEBI is accountable for controlling the stock market and suspending trading in which stocks have been oversold or made a short sale.

According to the PIL, the petitioner’s reason for filing the petition arose on January 25 when SEBI, despite prior information, did not suspend trading in Adani Group shares and allowed short sellers to artificially crash the stock market and settle their short-selling positions at the lowest rate by “cutting/exploiting” innocent Indian investors in violation of the law.

Shares of Adani Group companies remained weak for a seventh consecutive day on Friday amid a series of negative events surrounding the companies. Shares of the group fell 20 percent to Rs 1,173.55 on the Bombay Stock Exchange (BSE), the lowest in a year.

The company’s shares took a beating on the bourses after Hindenburg Research in a report accused the company of fake transactions and capital manipulation. The Group has dismissed the allegations and called it a lie. It also made a stand of going by law and rules to tackle everything. Shares in Gautam Adani’s companies fell further on Thursday after the Indian billionaire attempted to calm panicked investors but failed to stem a stock market crash that wiped $100 billion off his conglomerate’s value. In a recorded video, Adani assured the company’s investors and said that their choices and interest is his priority and others are on his secondary list. 

Overly Privileged Adani Group

An investigation by Hindenburg revealed that the firm was indulged in accounting manipulation and bank fraud for years. Hindenburg also commented negatively on the “high valuations” of the firms. It said that the “significant debt” of Adani firm may drown the whole group and may put them on “shaky economic footing”. Hindenburg summarised its report with 88 questions, asking about offshore belongings details, manipulative marketing, and leverages”.

While the concerned Group immediately condemned the report as “baseless” and “malicious”, the video address was the first time the company’s founder spoke about the crisis.

Analysts have long expressed concern that the rapid expansion of Adani’s businesses carries huge risks. This firm has $30 billion in borrowings and pushed itself into the post of the most leveraged firm in the nation. CreditSights last year had also raised its concerns about his debts and borrowings. This research company titled the report “Deeply Overleveraged”, targeting the firm of the Gujarati businessman. The Adani firm then defended itself by commenting that the leverage ratio of the company was healthy and there was nothing to worry about.

Speaking in a video, Adani said the group’s fundamentals were “strong” and that it had an “excellent track record in meeting” its debt obligations. He also commented that the firm’s issues regarding shares had been withdrawn to protect the shareholders from any harm. He added that these obstacles won’t affect his business and they will keep growing further after this.

Investors Seem Unconvinced By Adani’s Defense

Adani’s firm which was considered the most prominent and important once in these years continues to grapple with allegations by a short seller that it engaged in stock manipulation and fraud in the “biggest fraud in the company’s history”.

These allegations led to a loss of about $70 billion in market value from Adani’s various listed companies (and hit the net worth of the group’s founder, Gautam Adani). Adani Group has taken offense and issued a 413-page rebuttal to allegations of fraud by the Research of Hindenburg (which is governed by Nathan Anderson). The accused firm called the Hindenburg report baseless and said the shorting of bonds and derivatives by Adani-related companies overseas was a securities fraud. For good measure, the company said that Hindenburg’s behavior amounted to a “calculated attack on India”.

Adani’s link With The Government Is A Point To Note

Rumors confirm that PM Modi and Adani are quite close and this has helped the firm in recent years which led to its expansion into various important sectors. Last summer, Adani became the nation’s richest personality leaving behind Mukesh Ambani.

But it is unclear whether these connections will help: Modi and his government have so far stayed out of the fray. It is uncertain whether and how Indian regulators might intervene, as Hindenburg is hitting Adani’s foreign investments. The battle is affecting investor confidence in India. Nifty, which also includes Adani’s firms, fell by 2.5% in the last week.

edited and proofread by nikita sharma