Hindenburg Research gets a show cause notice from SEBI in Adani Group case; a US firm calls it "nonsense"

The Adani Group was charged with illegal activities and manipulating share prices in the Hindenburg Research study.

Adani-Hindenburg dispute: In the Adani Group issue, India's capital market regulator, the Securities and Exchange Board of India (SEBI), reportedly served the US-based short seller Hindenburg Research with a show-cause notice. According to Hindenburg, the notice details alleged regulatory infractions by the short seller in India.


The Adani Group was shocked by the Hindenburg report's accusations of accounting fraud and stock market manipulation last year.

Hindenburg calls notification  "nonsense"

Hindenburg said the show cause notice is 'nonsense' and an attempt to intimidate and silence anyone who exposes corruption and fraud committed by the most powerful individuals in India. The company stated: To achieve a specific goal—to intimidate and silence those who reveal corruption and fraud done by the most powerful people in India—we are posting this letter in its full. To be perfectly honest, we think it's ludicrous.

The New York-based company said in a statement that it had disclosed that it was short on Adani (i.e., it had expected a decline in the value of the stock and traded on it) at the time of publishing the report that claimed a "brazen stock manipulation and accounting fraud scheme over decades" at the Adani group.

Although it quickly added that it might "barely come out above breakeven" on its bet, it revealed that Kotak Bank had established and managed an offshore fund structure that its "investor partner" had utilized to go against the company.

Hindenburg stated it made USD 4.1 million in gross revenue through "gains related to Adani shorts from that investor relationship" and only USD 31,000 through its short position of the US bonds issued by the conglomerate, without disclosing the investor's identity. The Adani Group has consistently refuted every accusation.

SEBI's claims regarding the Hindenburg report were vague.

Following a 1.5-year inquiry, SEBI found no factual errors in our Adani research. Rather, the regulator objected to our use of the word scandal to describe several previous cases in which Indian regulators had charged Adani promoters with fraud and our citation of a person who claimed SEBI is dishonest and colludes 'hand in glove' with companies such as Adani to circumvent regulations," the statement read.

The market watchdog SEBI was alleged to have made "nebulous allegations that our report contained misrepresentations and inaccurate statements meant to mislead readers" in the report.


Some of the questions addressed by the show cause notice, according to the US company, are as follows: "Did Hindenburg work with many entities to short Adani, making hundreds of millions of dollars? No, we only have one investing partner, and after costs, our Adani short might not even break.

It stated that although our work on Adani was never financially or personally justified, it is by far the work of which we are most proud.

Hindenburg reported that on June 27, it received an email from SEBI and then a show cause notice detailing alleged regulatory infractions in India.

Hindenburg-Adani row

In a damning report released on January 24, 2023, Hindenburg Research accused the Adani Group of blatantly manipulating stock prices and engaging in accounting fraud. This caused a stock market meltdown that, at its lowest point, destroyed around USD 150 billion from the group firms' market worth.

The US-based short seller Hindenburg Research made claims against the Adani group, but the Supreme Court rejected the formation of a SIT in February and stated that market regulator SEBI will carry out further investigation.


Chief Justice D Y Chandrachud, Justices J B Pardiwala and Manoj Misra, and other members of the bench declared that they could not control SEBI's investigative authority. The Apex court further declared that there hasn't been any hard evidence shown against Gautam Adani up to this point. In twenty-two of the twenty-four cases involving accusations against the Adani group, SEBI has concluded its investigation.


The top court further declared that the case's facts did not support giving the investigation over to a Special Investigation Team (SIT) or other investigative body.