In this context, its decision to absolve the Adani conglomerate of any major wrongdoing fits a predictable pattern, one where credibility is traded for compliance and questions are neutralised rather than answered. The outcome has had an immediate impact on markets, with Adani stocks recovering a good part of their earlier losses, yet the verdict has failed to silence critics. Instead, it has reinforced the perception that regulatory oversight in India remains selective and compromised, particularly when powerful business interests are at stake.

The Hindenburg report, released in early 2023, was a carefully constructed document that shook not only the Adani Group but also investor confidence in India’s corporate governance standards. Its allegations were severe: inflated valuations, opaque ownership structures, use of offshore shell companies, and violations of minimum public shareholding norms. At the heart of the report was the suggestion that Vinod Adani, brother of Gautam Adani, orchestrated a web of offshore entities through which money was allegedly routed back into Adani stocks, boosting valuations artificially and raising serious questions about transparency. Hindenburg’s research, while dismissed in India as foreign meddling, was taken seriously by global investors who saw in it a classic example of how conglomerates with political backing might evade scrutiny.

Against this backdrop, SEBI’s investigation and its eventual conclusions were being closely watched. For months, there was speculation that the regulator might take some middle path—acknowledging lapses but avoiding any serious indictment that could destabilise markets or embarrass the government. The clean chit it finally delivered was, therefore, in keeping with expectations that it would shield the Adanis rather than expose them. What is more disquieting, however, is the manner in which SEBI’s order has sidestepped core issues raised by Hindenburg. The regulator seems to have narrowed the scope of inquiry to technicalities while ignoring the broader structural questions about shareholding patterns and offshore linkages.

The issue of public shareholding is a telling example. Under Indian law, listed companies are required to maintain a minimum of 25 percent public float, ensuring that ownership is not overly concentrated and that markets remain fair and transparent. Hindenburg alleged that Adani companies violated this requirement by using opaque foreign portfolio investors (FPIs) with links to Vinod Adani to hold significant stakes. These entities, registered in tax havens like Mauritius and Cyprus, had little or no business activity apart from their investments in Adani stocks. To any independent observer, the concentration of holdings by such shadowy FPIs would merit a thorough investigation. Yet SEBI’s report, far from scrutinising these entities, brushed the matter aside as inconclusive. This refusal to dig deeper reinforces the suspicion that the regulator had no appetite to pursue uncomfortable truths.

Equally troubling is SEBI’s silence on the offshore structures allegedly controlled by Vinod Adani. The Hindenburg report mapped out a network of shell companies that, it claimed, were instrumental in round-tripping funds back into India. Such allegations go beyond mere violations of securities law; they strike at the heart of anti-money laundering frameworks and corporate governance. If true, they would not only expose manipulation of stock prices but also suggest systemic failures in monitoring cross-border capital flows. By avoiding any meaningful engagement with these charges, SEBI has left a gaping hole in its credibility. Investors, both domestic and foreign, are left wondering whether the regulator is capable of acting impartially when it comes to politically sensitive corporate groups.

The defence of SEBI’s approach rests on the argument that its job is to work with available evidence and not indulge in speculation. Yet this defence appears hollow when one considers the asymmetry of resources between a short-seller based abroad and a regulator armed with investigative powers. Hindenburg, operating with limited access, managed to unearth patterns that raised global alarm. SEBI, with its statutory authority, access to company filings, and the ability to summon information from multiple jurisdictions, could have gone much further in verifying or disproving the allegations. That it chose not to suggests not incapacity but unwillingness. It is in this sense that SEBI’s conduct reflects its embeddedness within the Establishment, where protecting systemic stability often becomes a euphemism for shielding the powerful.

The immediate beneficiary of this regulatory leniency is, of course, the Adani Group. The clean chit has infused confidence back into its stocks, allowing them to recover from the battering they took in early 2023. For a conglomerate deeply invested in infrastructure, energy, and logistics—sectors central to the government’s development narrative—the restoration of market confidence is critical. Investors, at least in the short run, appear relieved. Yet relief is not the same as trust. The market may respond positively to regulatory exoneration, but doubts about governance continue to hover. In fact, the clean chit, by appearing too convenient, may deepen scepticism among discerning investors who suspect that the truth has been swept under the carpet.

The broader implications of SEBI’s decision go beyond the fortunes of a single conglomerate. They touch upon the credibility of India’s regulatory architecture at a time when the country is seeking to position itself as a reliable destination for global capital. Investors look not only at growth prospects but also at the integrity of institutions. When regulators are seen as pliant, the risk premium rises, undermining the very attractiveness of the market. India has often compared itself favourably with China, highlighting its democratic framework and independent institutions. Yet the handling of the Adani affair blurs these distinctions, exposing weaknesses that global investors will not ignore. (IPA Service)