Hindenburg Research called out India’s markets regulator for failing to address the fraud it alleged in a report on the Adani Group early last year, adding that it saw gains of only over US$4 million in the short-seller episode that caused an epic market rout for the conglomerate.

The Securities and Exchange Board of India, or Sebi, “seems more interested in pursuing those who expose such practices” while its investigation into billionaire Gautam Adani’s empire has hit a wall, the US short-seller said in a statement on its website Monday. It got a notice from Sebi in June saying its scathing January 2023 report on the Adani Group had certain misrepresentations and inaccurate statements that were meant to mislead readers.

The bombshell report earned a gross revenue of about US$4.1 million through gains related to Adani shorts from “one investor relationship” - it didn’t name who -  and about “US$31,000 through our own short of Adani US bonds,” Hindenburg said in the July 1 statement.

Hindenburg alleged last year widespread corporate malfeasance by the ports-to-power conglomerate, calling it “the largest con in corporate history.” Despite Adani Group repeatedly denying Hindenburg’s allegations, the ensuing stock rout at one point had wiped out more than US$150 billion in the market value of its listed companies. Adani Group has recovered the bulk of its stock losses since.

Sebi’s notice “conspicuously failed to name the party that has an actual tie to India: Kotak Bank,” which created and oversaw the offshore fund structure used by Hindenburg’s investor partner to bet against Adani, Hindenburg said. The regulator “masked the “Kotak” name with the acronym “KMIL”,” it added.

KMIL refers to Kotak Mahindra Investments Ltd, the asset management company.

“Sebi has neglected its responsibility, seemingly doing more to protect those perpetrating fraud than to protect the investors being victimised by it,” Hindenburg said in the statement.

The Indian markets regulator didn’t immediately respond to Bloomberg’s request for comment. Representatives for Kotak and the Adani Group did not immediately respond to requests for comment.

In the wake of Hindenburg’s Adani report, India’s Supreme Court ordered Sebi to probe allegations while setting up an expert panel to look into regulatory lapses. 

In January this year, the top court asked Sebi to wrap up its investigation within three months and said no more probes were needed.

Hindenburg’s latest broadside comes at a time when India’s newly energised opposition parties have been criticising Prime Minister Narendra Modi for crony capitalism and favouring billionaires like Adani and Mukesh Ambani over the rest of the citizens in a fiery standoff in parliament this week.

  - Bloomberg