Harsha Kakar
Over the years global institutions, funded by individuals and organizations inimical to India’s interests, have attempted to impact India’s growth as also damage its global credibility. They have provoked agitations seeking to break the nation’s harmony, released reports aimed at lowering its global standing as also damage the reputation of its financial institutions. There are many in India who exploit their anti-India statements, hoping to corner the Government, without questioning the validity of its source, conveying they trust these troublemakers more than our own institutions. Sadly, many who back these entities are themselves involved in multiple irregularities.
The recently released Hindenburg report, was one more such incident. Hindenburg’s business is short selling, implying it must employ all means, legal or illegal, to drop share prices of major industrial houses to attain profit. In Jan 2023, Hindenburg released a report mentioning Adani Group was engaged in stock manipulation and financial misconduct. Adani’s statements rejecting the report did little to limit the damage. This report wiped out over USD 100 Billion of the group’s market share.
As per the Business Standard, Hindenburg made a declared profit of USD 4 million by short selling from this report. How much more it gained partnering those with whom it secretly shared the report, prior to its release, is unknown. Evidently, the whole exercise was planned to exploit an Indian company with global operations.
Buoyed by its success, Hindenburg planned its second hit on India, proudly announcing it a day before its release. In a tweet, Hindenburg mentioned, ‘Something big soon India.’ It was certain that its success would be greater than earlier and profits far higher.
Post Hindenburg’s initial targeting of the Adani group, SEBI cornered them by issuing it a show cause notice that another hedge fund institution (Kingdon Capital) had access to the report months before it was published, adding to their profits. Kingdon was also served with a notice and had admitted to possessing the report. Hindenburg denied the accusation, claiming it was falsely targeted.
It has thus far not responded to the show cause notice, but on the contrary, adopted a strategy of ‘offense is the best defence.’ It retaliated to the show cause notice by accusing the head of SEBI of wrongdoings and has since been demanding that the SEBI chief come clean on charges it has levied. A clear case of the pot calling the kettle black. Aware that it could be accused of falsifying details, Hindenburg issued a disclaimer at the end of its current report clarifying its own position, attempting to avoid being charged of misleading the public.
Mauritius, where Hindenburg, in its report, had claimed offshore accounts were based, has denied the same. The Financial Services Commission of Mauritius termed the presence of shell companies in their countryas ‘false and baseless.’
In India, SEBI and its chairperson, Madhabi Puri Buch, claimed no wrongdoings, releasing all details to the public. However, sensing an opportunity to corner the Government and its institutions, opposition political parties jumped into the fray. Rahul Gandhi went on to state that there was significant risk in the Indian stock market as the governing institution was ‘compromised.’
Companies across the world have been targeted by short sellers exploiting similar strategies. Some have suffered losses. In the case of Fairfax Financial Holdings of Canada, targeted by another short seller, Muddy Waters, the Bank of Canada was compelled to issue a research note to downplay the incident.
In India, the stock markets had no impact from the Hindenburg report, conveying the common investor trusts its institutions rather than those attempting to damage the nation’s credibility.
Currently, while the government and the opposition, ledby the Congress, battle it out on the Hindenburg report, a few issues need consideration. Firstly, why is any statement from a foreign source enough for opposition parties to jump and demand resignations, probes, as also term Indian institutions as failures. It has become a fashion amongst politicians to discount every Indian clarification while favouring what flows from abroad as the gospel truth.
Thank God, the Indian public are at a variance with their own politicians. Their rejection of the Hindenburg report by the manner in which the stock market behaved, displayed that they prefer their own institutions rather than be swayed by exploiting politicians.
Secondly, first comments from members of the opposition came from Jairam Ramesh, who took a mere 27 minutes to read the 78-paragraph report, digest it and comment. As per online data the Hindenburg report was released at 2157 hours and first comments issued at 2224 hours. Does this imply that the report was available to a select few even before it was released on similar lines as it was available with Kingdon Capital, the last time.
Thirdly, post the Hindenburg report in Jan 2023, it took the Adani group over a year to recover its losses. It was compelled to cancel its share sale worth USD 2.5 billion, scheduled for Feb last year. This time, the report is timed with its USD 1 Billion share sale scheduled for mid-September. The timing itself is too close to be termed as a coincidence.
Fourthly, how is Hindenburg, a foreign entity, entitled to demand that the SEBI chairman ‘come clean’ on their accusations, while they themselves refuse to comply with Indian government notices terming them fake and concocted. They can only possess such confidence when their claims are backed by senior Indian politicians, mainly those with dubious interests. Private global entities should neither have a right nor be encouraged to question Indian institution heads.
Fifthly, there are claims that George Soros, known for his anti-Modi bias, has interests in both Kingdon and Hindenburg. Such inputs will always be based on speculation; as many investments are never disclosed, however, this cannot be ruled out. The fact is that targeting the Indian stock market will reduce FDI into the country and the weaken the economy, which could have an impact in forthcoming elections.
The report gave the opposition, which has been targeting the Adani group, throughout elections as a Government favourite, an added missile to fire. Damaging Indian reputation and its institutions for political gains based on reports by foreign entities, without validating its findings, has become a national political pastime.
The author is Major General (Retd)
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