Supreme Court Panel Report on Hindenburg Allegations
The Supreme Court panel’s report stated that it is very much difficult to arrive at a conclusion of a regulatory failure of the legislative side. But acknowledged that there is a need for effective enforcement policy. Hence, SC advises that the enforcement policy must be inconsistent with the legislative policy adopted by Sebi.
On 24th of January 2023, the Hindenburg report launched a direct attack against the Adani group and it caused havoc in the Indian Capital markets as a result they are an insane impact on the Adani stocks seven Adani companies lost more than 100 billion dollars in the market cap
Now Hindenburg is a financial research company that looks to find self-created or man-made issues and uses a method called Short Selling to make a profit by the fall of a company’s stock prices and it is not illegal.
The Hindenburg allegations, we all know that Adani who had a net worth of roughly 120 billion dollars he had gotten most of his wealth in the last three years at the end of 2019 his net worth was around 20 billion dollars but the rest 100 billion dollars got accumulated in the past three years itself and this according to Hindenburg is largely through the appreciation of his stock prices in his group’s seven key listed companies,
WHAT DID HINDENBURG REPORT SAY?
The Report disclosure alleges misrepresenting the use of tax havens and debt levels. The report says key all the publicly listed companies of Adani have gradually developed a lot of debt and are over-leveraged. Adani group also has liquidity risks due to high short-term liabilities, with five of the seven key listed companies having reported “current ratios” below 1, indicating near-term liquidity pressure.
Shares is definitely a new way which is used by several aggressive promoters to take loan and Adani group has pledged its entire Equity stake in the newly acquired companies, so again when the stock price of these companies go up they’re able to pledge the value of those stocks to get even bigger loans which again helps them back giant government projects and it’s very risky because it could lead to a vicious cycle whereby if the Share value drops the banks could sell the shares and when such huge volumes of shares are released the investor sentiment would go negative and that would cause the stock to crash and this would further lead to more selling this is why the Hindenburg report says.