Business Standard

All that's problematic about Hindenburg report and the allegations in it

The attack on India by foreign bodies through flashy tactics indicates seething contempt for the success the country has achieved in the past decade

Adani, Adani Hindenburg

Hitesh Jain
Earlier this year, Hindenburg Research, a profit-motivated “activist firm”, released a malicious report on the Adani group. The report, which was dramatically revealed to the public with its sensational title, resulted in exactly what Hindenburg Research envisioned: Frenzied panic that caused the Indian stock markets to plummet. The report made several allegations on the Adani group; it alleged price manipulation of shares, circumvention of regulations and fabrication of key compliances, among other things.
 
The havoc caused by the report led several persons to the Supreme Court of India where multiple writ petitions were filed. Taking cognizance of the matter, the Court constituted an expert committee headed by former Supreme Court Judge, Justice (Retd) Abhay Manohar Sapre, along with other luminaries such as Justice (Retd) J P Devadhar and K V Kamath. The committee was tasked with assessing the issues raised by Hindenburg in its report and thereafter provide the Supreme Court with detailed observations as to their veracity and suggestions to improve the Securities and Exchange Board of India (Sebi). 
 
The first report of this expert committee has now been released to the public. As the committee has observed, the Hindenburg report was largely based on publicly available information which was presented in a manner that it caused the Adani stocks to nosedive. It has also noted that the high volatility of the Adani stocks was “attributable to the publication of the report and its consequences”. However, despite the analysis provided by financial pundits on Twitter, the Supreme Court-appointed committee has clearly termed the Hindenburg allegations as mere suspicions and observed that “suspicion, however strong, cannot replace proof”. Further, in analysing Sebi’s investigations into the matter and ascertaining whether there was any regulatory failure on part of Sebi, the committee has stated: “Suffice it to say, it would not be possible to return a finding of regulatory failure on this count since Sebi has an active and working surveillance framework to take notice of high price and volume movements and has applied itself to the data generated by such surveillance, applying objective criteria, to consider if the integrity of the natural price discovery process has been manipulated”. The committee has even recorded that no coherent pattern of abusive trading has come to light.
 
However, what is problematic about the Hindenburg report, apart from the chaos that a foreign firm purposefully created in the Indian market, and subsequently capitalised on, is  its concerted attempt to smear India’s reputation on the world stage. It is noteworthy that this conspiracy has been suspiciously timed when India is at the helm of the G20. The G20 presidency has undeniably put India in the spotlight. However, even apart from this, India has been rising in ranks on several indices. Further, unlike most western nations, we have steered clear of a worrying global recession with our reasonable policies and economic foresight.
 
In the past decade, India began carving out a novel space for itself on the global dais, whether through culture, diplomacy, or films. This tremendous growth in various sectors invigorated the country’s entrepreneurial affinity and pushed for homegrown, Indian talent. In this background, it is quite clear why foreign bodies with perverted intentions are seeking to malign India, attack its institutions and break its economic backbone. 
 
However, such lobbies forget that the momentum India flaunts at present has not been achieved overnight. It has taken years to carefully build and strategically implement economic and social reforms, new-age institutions, robust laws and growing start-up industries. Therefore, to attack India through such flashy tactics indicates seething contempt for the success the country has achieved in the past decade. What is possibly most frightening to such foreign institutions is that India is constantly upgrading. Whether it is decriminalising laws, introducing vital legislation, or empowering institutions, there is a constant and sincere attempt to catapult the country into another league. Therefore, before attacks on these systems and processes are engineered, it is important to recall that they have been perfected, and are thus too well-oiled to damage. 
 
Further, constant criticisms of judicial integrity, cheered on by a lobby of Indians who seem to revel more in India’s losses than its successes, is a predictable pattern. However, our courts continue to remain committed only to the Indian Constitution and its principles. Take the verdicts delivered by the apex court last week; a biased Court, as alleged, would have found a clear path to deliver judgments in full favour of the central government. Instead, the Supreme Court reached its decision by interpreting legal principles in a balanced and legally appropriate manner. 
 
Lastly, what is most shocking, is to watch political parties fall prey, even go so far as to celebrate, the attacks engineered by foreign organisations against India, despite their damaging aftermath. Political battles aside, for politicians to use such conspiracies as fuel for campaigns is hurtful, if not embarrassing. This attitude not only maligns the country and our Prime Minister, but halts democratic and parliamentary processes. 
 
However, while the flood of hit-jobs – from Hindenburg to Pegasus – continue, they have resultantly almost become natural. Their existence does not cause so much as a dent to India, as we continue to remain insulated by our robust economy, flourishing democracy and intact institutions.
The author is managing partner, Parinam Law Associates
 
Disclaimer: These are personal views of the writer. They do not necessarily reflect the opinion of www.business-standard.com or the Business Standard newspaper

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First Published: May 20 2023 | 9:57 PM IST

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