The news about the move by the founder of the US-based short seller Hindenburg Research to disband the entity apparently has huge implications for India and especially for its regulatory institutions. “This is a very important development and will play a role in reinforcing the faith in the Indian regulatory institutions,” says Prasanna Tantri, associate professor, finance and the executive director at the Centre for Analytical Finance at the Indian School of Business (ISB). He also says that “while there is scope to improve the governance by Indian corporates, the fact that only one business group was repeatedly targeted by Hindenburg and this was followed by personal attacks on the head of an Indian regulatory body, has more to it than meets the eye.”
Hindenburg- Adani Saga
One of the key companies that have been at the receiving end of lot of scathing reports from Hindenburg is the India conglomerate, the Adani Group companies. Starting 2023,the Adani Group stocks have seen millions wiped out as a result of the reports released by Hindenburg. On January 24, 2023, Hindenburg Research had published a report titled “Adani Group: How The World’s 3rd Richest Man Is Pulling the Largest Con in Corporate History”, wherein it accused the conglomerate of fraud and ‘brazen’ stock price manipulation. This led to significant correction in the Adani Group stocks as the report alleged that Adani Group companies manipulated share price.
Hindenburg allegations against SEBI Chief
It did not end there. On August 10, 2024, Hindenburg Research levied some serious allegation against the Chief of India’s market regulator, SEBO. According to the report, chairperson of Securities and Exchange Board of India (SEBI), Madhabi Puri Buch, who was overseeing the Adani investigation was accused of having a stake in some offshore entities allegedly involved in ‘Adani money siphoning scandal’. The news did result in some knee jerk reaction in the market but the impact did not last too long.
FM lauds greater transparency brought in by Indian regulators
In fact, back in October last, speaking at the best banks awards function organised by the Financial Express, finance minister Nirmala Sitharaman, while responding to a question on the allegations raised by the US-based Hindenburg against the Indian market regulator and in particular its chairperson Madhabi Puri Buch, the finance minister put up a strong defence of India’s regulators. Without discussing a particular regulator, she felt what stood out about the Indian regulators was an undisputed fact that they had got “greater transparency into the system” and were doing “a world-class job.” On the specific case, she said, “there is a lot to be looked into in terms of the facts which are coming out on this matter.” Adding that “I am not against any kind of questioning, review or critiquing, but we have to be extremely conscious that we look at our regulators for what they have done” to grow the Indian markets, banks and insurance.
What many feels needs to be seen now is the extent to which, the entire Hindenburg episode is taken as a reminder to stay focussed on improving the governance and the extent to which this development helps reinforce the faith in Indian regulatory institutions.