In public interest. Hindenburg report on Adani Group: Congress demands serious investigations by RBI and SEBI

Congress party on Friday demanded “serious investigations” by the Reserve Bank of India (RBI) and market regulator Securities and Exchange Board of India (SEBI) into the series of extraordinary allegations levelled by US short seller Hindenburg Research against the Adani Group.

Serious investigations are necessary for wider public interest given the high exposure of financial institutions such as the Life Insurance Company of India (LIC) and the State Bank of India (SBI) to the Adani Group and its implications for financial stability and for the crores of Indians whose savings are stewarded by these pillars of the financial system, Jairam Ramesh, Member of Parliament and General Secretary (communications), AICC said in a statement.

Also read: Hindenburg Research report may not impact Adani’s FPO share sale: InGovern Research

“We fully understand the close relationship between the Adani Group and the current government. But it is incumbent on the Congress party as a responsible opposition party to urge SEBI and RBI to play their roles as stewards of the financial system and to investigate these allegations in the wider public interest,” Ramesh said.

“The Modi Sarkar can try and impose censorship. But in an era of globalisation of Indian businesses and financial markets can Hindenburg-type reports that focus on corporate misgovernance be simply brushed aside and dismissed as being “malicious”?”

This Congress party statement came a day after the Adani Group described the activist short seller Hindenburg’s report as “malicious.” 

Extraordinary allegations

Hindenburg on Tuesday levelled a series of extraordinary allegations in an over 100-page report about the Adani Group and characterised the meteoric rise of this Conglomerate as “The Largest Con in Corporate History” through a brazen scheme of stock manipulation and accounting fraud dating back decades.

Congress party in its statement on Friday highlighted that the Hindenburg report alleges “brazen stock manipulation” and “accounting fraud” by the Adani Group via “a vast labyrinth of offshore shell entities.”

“The allegations of financial malfeasance would be bad enough, but what is worse is that the Modi government may have exposed India’s financial system to systemic risks through the liberal investments in the Adani Group made by strategic state entities like LIC, SBI and other public sector banks. These institutions have liberally financed the Adani Group even as their private sector counterparts have chosen to avoid investing because of concerns over corporate governance and indebtedness,” Ramesh said.

Also read: Adani Enterprises kicks off $2.45 billion share sale while under short-seller attack

As much as 8 per cent of LIC’s equity assets under management, amounting to a gigantic sum of ₹74,000 crore, are in Adani companies and comprise its second-largest holding.

State-owned banks have lent twice as much to the Adani group as private banks, with 40 per cent of their lending being done by SBI. 

“This irresponsibility has exposed the crores of Indians who have poured their savings into LIC and SBI to financial risk. If, as alleged, the Adani Group has artificially inflated the value of its stock through manipulation, and then raised funds by pledging those shares, banks such as SBI could face heavy losses in the event of a fall in those share prices,” he added.

Indians are increasingly aware of how the rise of Modi’s cronies has exacerbated the problem of inequality, but need to understand how this has been financed by their own hard-earned savings. “Will the RBI ensure that risks to financial stability are investigated and contained? Are these not clear-cut cases of “phone banking”?” Ramesh asked.

Ramesh said that normally, a political party should not be reacting to a research report on an individual company or business group prepared by a hedge fund. “But the forensic analysis by Hindenburg Research of the Adani Group demands a response from the Congress party. This is because the Adani Group is no ordinary conglomerate: it is closely identified with Prime Minister Narendra Modi since the time he was Chief Minister,” Ramesh said.

“For all its posturing about black money, has the Modi government chosen to turn a blind eye towards illicit activities by its favourite business group? Is there a quid pro quo? Will SEBI investigate these allegations to the fullest and not just in name?”

Also read: All Adani Group shares extend losses following Hindenburg Research report

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