NEW DELHI/MUMBAI: An 18-month battle between Hindenburg Research and India's Adani Group has taken a fresh turn with the U.S. based short-seller alleging over the weekend that the chief of the country's market regulator has a conflict of interest in the matter.
The Securities and Exchange Board of India (SEBI) has been investigating the group after Hindenburg Research's report in January last year set off an over US$150 billion selloff in the conglomerate's stocks despite the company's denials of wrongdoing.
The stocks have since recovered partially.
Here are some facts about billionaire Gautam Adani, his group and Hindenburg's allegations.
Who are Adani and Hindenburg?
Gautam Adani built his empire after starting out as a commodities trader.
India's Prime Minister Narendra Modi is from the same state as Adani, Gujarat, and their relationship has long come under scrutiny by Modi's opponents.
Before Hindenburg's report, Adani, a school drop-out, rose to become Asia's richest person, with businesses across ports, power generation, airports, mining, renewables, media and cement.
Hindenburg Research was founded in 2017 by Nathan Anderson.
It is a forensic financial research firm which analyses equity, credit and derivatives.
It has a track-record of finding corporate wrongdoings and placing bets against the companies.
What did Hindenburg and Adani say?
Hindenburg disclosed last year it held short positions in Adani companies through U.S.-traded bonds and non-India-traded derivatives.
It released a report that alleged Adani improperly used tax havens and flagged concerns about high debt levels at the company.
The Adani group called the report baseless and termed the allegations "unsubstantiated speculations."
What happened at Adani after Hindenburg report?
Hindenburg's report sparked a US$150 billion meltdown in shares of Adani's publicly listed companies last year.
Although the shares are still roughly US$35 billion down from levels before the Hindenburg report, they have staged a smart recovery.
That's partially because the ports-to-power conglomerate welcomed investors like Abu Dhabi conglomerate International Holding and investment firm GQG to shore up confidence by diluting some of the family's tight shareholding.
In July, Adani Energy Solutions became the first group company to return to the equity capital market, raising US$1 billion.
The group's flagship Adani Enterprises is also considering raising funds, Reuters reported earlier this month.
What is Hindenburg's latest allegation?
In a report published on Saturday, Hindenburg alleged that Madhabi Puri Buch, the chaiperson of SEBI, and her husband previously held investments in offshore funds also used by the Adani Group.
It says the Bermuda-based Global Opportunities Fund, which the Financial Times said was used by entities connected to Adani Group to trade in the shares of group companies, had sub-funds.
Citing whistleblower documents, Hindenburg alleges Buch and her husband invested in one of these sub-funds in 2015 and exited in 2018.
Hindenburg is trying to link this investment to what it argues is the slow pace of action against the Adani Group and offshore funds used by it.
"We find it unsurprising that SEBI was reluctant to follow a trail that may have led to its own chairperson," the short-seller said in its report.
Adani Group's 10 listed firms lost a combined US$11 billion in market capitalisation on Monday compared to Friday's close.
How did Buch and SEBI respond?
In two separate statements issued, Buch said the investments were made in a personal capacity before she took over as chief of SEBI and that all necessary disclosures had been made.
The fund in which Buch invested, IPE-Plus Fund 1, issued a separate statement saying it had not invested in any shares of the Adani Group.
A formal statement from the spokesperson of the regulator reiterated Buch's position and asked investors to remain calm and exercise due diligence before reacting to reports such as that by Hindenburg.
Updating on the status of the investigation into the Adani Group, the regulator said that it had concluded its probe into 23 out of 24 matters.
Six Adani Group companies have disclosed to stock exchanges that they have received show cause notices from the regulator.
A show cause notice signals an intention by to take disciplinary action if satisfactory explanations are not provided.
A show cause notice has also been issued to Hindenburg for violating Indian rules, which was made public by the short-seller in July.