The income-tax department may investigate several domestic and overseas entities for tax evasion over profits from short-selling shares of Adani Group companies following the controversial Hindenburg Research report on the conglomerate published in January. The market regulator is investigating possible collusion between the firm and at least 20 entities, including security firms and media professionals.
The Enforcement Directorate (ED) has informed the Securities and Exchange Board of India (Sebi) that certain entities seem to have had prior information about the Hindenburg report and gained by short-selling Adani Group stocks. During investigation by ED, it was also found that many of these firms did not report their windfall gains during this period to the income-tax department.
Sebi is basing its investigation partly on a report from the Enforcement Directorate that said that certain entities seem to have had prior information about the report and gained materially by short-selling stocks of the Adani Group. Some other people, including journalists, helped amplify the content of the report.
A senior ED official said that their probe was incidental. “The intelligence wing of our agency got some information in July about this. Since Sebi was probing it, we immediately sent the report to them. Now, if they file a complaint on this, then we can probe further. We are awaiting directions from them and the court,’’ he said.
Some of these entities are securities firms, foreign portfolio investors (FPIs) and foreign institutional investors (FIIs) based out of London, Ireland, France, Mauritius, Hong Kong and Cayman Islands. Domestic entities include a private financial institution that also has a group company providing banking facilities, and two Delhi-based brokerage firms.
“Not only is the matter subjudice, but investigations by multiple agencies are ongoing. Specific details and particular names cannot be disclosed at this stage,” one government official said. “During the investigation by ED, it was also found that many of these firms did not report their windfall gains during this period to the income-tax department. The matter is also under investigation by the income-tax department as agencies have arrangements for real-time exchange of intelligence,” another official said.
The ministry of finance, Hindenburg Research and the Adani Group did not respond to email queries seeking comment. A legal expert said: “Prima facie a larger conspiracy of financial nature is visible. Overseas entities are attacking Indian entities both for economic gains and geo-political reasons.”
PTI reported that George Soros-backed OCCRP (Organised Crime and Corruption Reporting Project) could release a similar report on some Indian corporate houses ahead of the G20 Leadership Summit and the General Elections. The Enforcement Directorate (ED) has already shared key findings in its investigation report with Sebi, which is conducting a detailed probe into the Adani-Hindenburg matter.
On August 15, HT reported that the Securities and Exchange Board of India (Sebi) approached the Supreme Court on August 14, seeking a 15-day extension to conclude its investigation into allegations of stock manipulation and accounting fraud against the Adani group made by US short-seller Hindenburg Research.
The Supreme Court is expected to take up the matter on September 1 or 4. By an order on May 17, the court had directed Sebi to complete its probe by August 14. The market regulator stated that it has made substantial progress and that the extension will enable it to submit the final status report on 24 matters it has probed in connection with the report by Hindenburg.
The Hindenburg report claimed that the Gautam Adani-led group engaged in “brazen accounting fraud” and “stock manipulation”. Although the conglomerate rejected the report as “unresearched” and “maliciously mischievous”, it triggered a massive rout of Adani group stocks, which lost about $150 billion in days and forced the cancellation of a ₹20,000 crore share sale in the group’s flagship.