Adani Stocks Decline Amid Escalating Dispute With Indian Regulator Over Hindenburg Report
Adani Group's shares saw a significant drop after a report by Hindenburg Research accused the head of India’s market regulator, Madhabi Puri Buch, of having conflicts of interest that hampered a proper investigation into fraud claims against the conglomerate.
On Monday, Adani Enterprises Ltd., the group’s flagship company, experienced a 5.5% decline in early trading. Adani Energy Solutions Ltd. plummeted by as much as 17% before recovering some losses. The majority of the group’s 10 listed companies traded lower, although the broader NSE Nifty 50 Index rebounded, aligning with gains in the Asian market.
The report, published on Saturday, alleged that Buch and her husband, Dhaval Buch, invested in offshore entities allegedly linked to a fund structure involving Vinod Adani, brother of Gautam Adani, the group’s billionaire leader. Madhabi Puri Buch denied any wrongdoing. The investments by the Buch couple were made in 2015, two years before Madhabi Puri Buch joined the Securities and Exchange Board of India (Sebi), the report stated.
Sonam Srivastava, founder of Wright Research, commented on the situation, saying that the stock market might experience short-term volatility as investors assess the credibility of these allegations. If proven true, the claims could damage investor confidence, deter foreign investments, and prompt stricter regulatory measures.
The fund structure mentioned in the report is managed by India Infoline, a financial services and wealth management company. Madhabi Puri Buch became a full-time member of Sebi in 2017 and was appointed as its chair in 2022. The confrontation between Hindenburg Research and Sebi has intensified after the Indian regulator questioned the US firm about its report against Adani earlier in 2023. That report had previously caused the Adani Group's market value to plummet by more than $150 billion. It also led India’s Supreme Court to order a Sebi investigation into potential violations and questionable trading activities involving the Adani Group. However, Sebi has not yet built a case against the conglomerate.
These new accusations come at a crucial time for the Adani Group, as it seeks to raise funds. Earlier this month, Adani Energy secured $1 billion through institutional share sales, and the group’s flagship company is considering raising an additional 100 to 120 billion rupees ($1.2 billion to $1.4 billion).
In 2023, following the release of Hindenburg’s report accusing the Adani Group of corporate misconduct, Adani Enterprises had to cancel a $2.4 billion share sale due to the ensuing stock market crash.
Arun Chulani, co-founder of First Water Capital, expressed doubt over any significant impact from these latest revelations, noting that the ongoing nature of the story has reduced the element of surprise.
