Hindenburg had accused the Adani Group of using its group companies — Adicorp Enterprises Pvt Ltd, Milestone Tradelinks Pvt Ltd and Rehvar Infrastructure Pvt Ltd — as conduits to route funds from various Adani Group companies to finance publicly listed Adani Power Ltd and Adani Enterprises Ltd
Market regulator Securities and Exchange Board of India’s (Sebi) order clearing the Adani Group of stock manipulation charges levelled by US short-seller Hindenburg Research has ended a two-year-long ordeal for the Indian conglomerate.
Hindenburg had accused the Adani Group of using its group companies — Adicorp Enterprises Pvt Ltd, Milestone Tradelinks Pvt Ltd and Rehvar Infrastructure Pvt Ltd — as conduits to route funds from various Adani Group companies to finance publicly listed Adani Power Ltd and Adani Enterprises Ltd.
The charges — though denied by Adani chairman Gautam Adani — triggered a stock rout in the listed Adani Group companies, eroding more than $150 billion in value at its lowest point.
According to the short-seller, the related-party transactions helped Adani avoid rules on related-party transactions and bypass Sebi's disclosure and approval requirements. In its order, however, Sebi ruled that fund transfers between group companies did not violate any regulation. It said that the transfers between the stated companies were loans, which were repaid with interest in various tranches before the start of its investigation.
The regulator has also dismissed Hindenburg’s allegations of insider trading, market manipulation and violations of public shareholding norms as unsubstantiated.
The Adani controversy has brought into the limelight the role of short-sellers — who bet on perceived weaknesses in a listed company’s financials to make a profit. While some defend the utility of short-sellers, arguing that they — in theory — uncover hidden problems, in practice most short-sellers seek to create panic to make money, which is not healthy for the market in the long term.
As India is set to become the third-largest economy in a few years, its companies could come under attack by short-sellers more often. Sebi, therefore, should take steps to ring-fence Indian companies from baseless accusations while nudging corporates to adopt greater transparency in their dealings.
