Hi everybody Hindenburg is back again but this time it’s not just adani versus Hindenburg it is Hindenburg going against the Security and Exchange Board of India itself Hindenburg research is back Hindenburg versus sem Chief Saga it’s another bomb share from Hindenburg involving mad Puri but who is the chairperson of the Securities and.
Exchange Board of India The Firm also claimed that but publicly confirmed an investment in an obscure morous fund allegation are more of a personal attack on Mrs Butch and her husband it is supposed to protect Indian investors but its chairperson is accused of doing the opposite for those who don’t know sebi is the Watchdog of the Indian market so.
Sebi is the entity which is supposed to prevent malpractices in the Indian market but Hindenburg this time says that sebi itself is involved in a Mal practice and just like last time ever since this report has come out the adani stocks have gone down by 2% 4% and 1.1% for adani ports adani total gas and adani Enterprises and the beauty of this.
Allegation is that regardless of whether this is true or not we were able to discover a beautiful web of transactions and money flow which will blow your mind now do you realize this is a very very big deal because if the sebi chief or sebi are found to be guilty of these allegations then the confidence of the investors will be completely shattered.
From the Indian market and this applies to both Indian as well as Global Investors and with these structures you will understand how money could be rotated through a complex web of companies to manipulate the market and this is something that I’m very very excited to share with you so in this episode today let’s break down this.
Complex web and try to understand what exactly does the Hindenburg report say about sebi how did the sebi chief respond to these allegations and most importantly who is the winner and loser in the second round of Hindenburg versus adani Saga this video is brought to you by grow school people when it comes to jobs and.
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Episode people before diving into this case here’s a quick summary of what exactly happened between adani and hinden book adani group adani group adani group companies continued to slide for a third straight session $6 billion gone in a day short seller Hindenburg research accusing the conglomerate of share price.
Manipulation and fraud using shell companies to pump up the stock of adani Enterprises the report is a malicious combination of selective misinformation baseless and discredited allegations India adani group says it’s exploring legal action against a US short seller Hindenberg research he says Hindenberg is making an attack not just on the.
Company he’s also making an attack on India and its growth Ambitions the fundamentals of our company are very strong we will continue to focus on a long-term value creation and so Hindenberg is a market research company in the US with a very simple strategy they dig into big companies they find dirt on them they.
Release a report to the public and during the same time they take short positions in the market eventually when the stock price of this company Falls Hindenburg makes a profit last year Hindenburg targeted the adani group so if you know the Indian market public companies in India are not allowed to own more than 75% of their own company.
But Hindenburg said that adani owns more than 75% of its shares and when this was made public it led to a huge appro but after that adani dismissed all these allegations and here’s where sebi was appointed to carry out an independent inspection of the entire case and after the investigation sebi discredited hindenburg’s allegations so this time.
Hindenburg came up with a new report accusing the sebi chief herself of not carrying out the investigation transparently and here’s where the Hindenburg 2.0 Saga started the biggest corporate drama in India’s history is turning into a sequel short seller Hindenberg research has published a new report accusing the Indian regulator of.
A conflict of interest with the adani group now sebbi is basically India’s market watch do it is supposed to protect Indian investors but its chairperson is accused of hiding alleged vested interests and this is happening first time in the world in recent history when a stock market regulator and its chairman has been directly.
Pinpointed of having an investment in a company which they are already investigating so now the question is when sebi has discredited hindenburg’s allegation when Adis have denied it now what exactly is the Hindenburg report trying to convey well here’s where the hurg report mentioned something called a convoluted web structure and they say.
That this is the instrument that sebi chairman madavi B adani and an Indian wealth management company called iifl have used to move illegitimate money into the adani group companies so let’s start by understanding what exactly is this convoluted web structure the first thing you need to understand about these convoluted fund structures is that it is.
A multi-layered structure so it first has a master fund this master Fund invests in several smaller funds then each smaller fund operates with its own investment strategy for example let’s take a company called Alpha Investments which has three funds fund a fund B and fund C now each of these funds has a different portfolio of investment so.
Fund a could be investing in just Tech startups fund B could be investing only in bonds and fund C could be investing in equity then each of these funds may have more subsidiaries in the form of A1 A2 A3 and B1 B2 B3 now here’s where there are two more level of legal and Geographic complexity so A1 could be located in Bermuda A2 could be located.
In seashells and A3 could be located in Switzerland so if you see the structure there are three levels of complexity structural complexity due to the subsidiaries geographical complexity due to their locations and legal complexities due to the regulations in those locations so because of these complexities there is very less.
Transparency so now the question we here is why do these kinds of complex funds exist in the first place well that is because these funds give an entity three major superpowers the first superpower is tax burden so just like shell companies are opened in tax Havens to save taxes these complex Financial structures are set up to avoid paying.
Taxes on investments or to optimize tax benefits because if you look at these locations like Bermuda and macius they have almost zero taxes sometimes they have absolutely zero taxes the second superpower that this fund gives you is that it helps you navigate different regulations of different countries and lastly it’s meant to give you high.
Return on investment if this is clear to you let’s come back to the Hindenburg report the Hindenburg report claimed that adani is using a web of these convoluted funds to make illegitimate Investments and this time the report says that even sebbi Chief is involved in this structure so let’s try to understand how does this convulated fund.
Structure look like in case of the adani group so in this case there is a parent fund called Global opportunities fund then in the second layer of the structure there is a subf fund called Global Dynamic opportunities fund which is set up in burmuda and as we all know burmuda is a tax Haven then there’s another layer called IP plus fund one.
Which is set up in macius which is again a tax Haven and then this IP plus fund one invests in the Indian stocks and derivatives so if you look at the structure we have three layers Global opportunities fund then there is global Dynamic opportunities fund and then there is IP e plus fund one now how did the Adis rotate their money well.
According to the report the adanes imported a power equipment for which they paid more than the original price and the company that they imported this equipment from is called asset trade and investment private limited and this company is owned by Gotham adani’s Brother who goes by the name vinode adani secondly asset trade and.
Investment private limited invested $4.3 million in global Dynamic opportunities Fund in 2013 and they also moved $100 million to Global opportunities fund and then as we already know this Global Dynamic opportunities Fund invests in IP plus fund one which invests its money into the Indian stock market so the report says that vnode adani who’s the.
Brother of Gotham adani he used this structure to invest in the Indian markets with the funds allegedly siphoned from over invoicing of this power equipment and this over invoicing was done to the adani group and the highlight word in this entire statement is the word allegedly if this is clear to you let’s see the involvement of iifl.
And SE Chief people according to this report iifl has a history of setting up these convulated fund structures in this case IFL has set up this web of funds for adanes secondly the report says that the reason why sebi is not carrying out an investigation is because the sebi chief madavi B and her husband Daval Bo both have investments in one of these.
Funds and as we can see in this chart in 2015 they invested in global Dynamic opportunities fund where even asset trade and investment private limited has invested which is owned by vinode adani at the same time sebi is probing into two funds emerging India Focus fund and EM resurgent fund These funds are investers in the adani stocks but if you.
Look at their beneficial owner it is a company called Trident Trust Company and this company is administered by global opportunities fund which has a subf fund called Global Dynamic opportunities fund fund where madbi had invested in 2015 this is how mad B vnode adani IFL and the adani stocks are connected together this is the reason why Hindenburg says.
That mad has a conflict of interest when it comes to investigating into the arani case and the report says that although mad had transferred all the shares to her husband she continued using her personal email to communicate with the fund and because of these Investments and the conflict of interest the Hindenburg report says that sebi has not.
Carried out its investigation properly this is the first allegation that they have the second allegation that they have is that Daval B who is the husband of madbi he has no experience in investment because he has worked at unil which is a consumer Products company but then later he switched to suddenly become a senior adviser at Blackstone.
Which is one of the largest investors and sponsor of a real estate asset class called Real Estate Investment Trust or Reit now until then Reed was not so prevalent in the Indian market market and the first reat went IPO on 1st of April 2019 so the Hindenburg report says that after madvi became a member of sebi then Embassy obtained se’s approval for.
Reit and it iped on 1st of April 2019 so from what I could understand it basically says that mad favored the IPO of Reit because her husband worked for a company that dealt with Reit these are the points that Hindenburg points out if this is very very clear to you let’s understand sebi Chief and her husband’s response to these allegations let’s.
Start with the first set of allegations about her Investments for these allegations she has clarified that the investment was made way back in 2015 when both madbi and her husband Daval were private citizens living in Singapore so this was long before she took up her role at sebi and this was a personal investment which was made.
Without any connection to her future position at sebi and she clarified that the reason why she invested in that fund was because the fund’s chief investment officer is a close friend who goes by the name Anil Aja and most importantly she redeemed all of her investments in 2018 itself and what’s funny is that she became the sebi chief in 2022 so she.
Practically redeemed all of her Investments almost 4 years before she became the chairperson at sebi now the Hindenburg report over here points out that Anil Aja was a director of adani Enterprises for 9 years ending in June 2017 now is this wrong not at all is this illegal not at all is it questionable well according to to the.
Hindenburg report yes but you decide whether this is questionable or not I will leave it completely up to the audience the second allegation is regarding D’s appointment at Blackstone to clarify this mad laid out the timeline Daval was appointed as a senior adviser to Blackstone in 2019 which was well before madvi took up her role as a.
Chairperson at sebi which was in 2022 before this she was working as a whole-time member of sebi starting in April 2017 and she mentioned that Daval got his job because of his capabilities and not because of something else he’s an IIT Delhi graduate and has years of experience at Hindustan uni liver both in India and globally madbi also made it.
Very clear that as soon as she was appointed as se’s chairperson Blackstone was immediately added to the recusal list meaning she took steps right away to ensure that there would be no conflict of interest in any matter related to Blackstone so in short she made it very clear that D’s advisory position at Blackstone had nothing to do.
With her capabilities at 7 be and there is no overlap no Insider information no secret deals just a professional role based on his expertise this was the response of se’s Chief and when it comes to adani’s response this time the Adis have just said that Hindenburg allegations are malicious mischievous and manipulative to make personal gains.
So this time the Adis are not taking Hindenburg seriously at all this was the story of Hindenburg vinod adani adani and the sebi chief so now you decide who’s right and who is is wrong and regardless of that the one thing that came out very beautifully in this entire episode is this convulated structure and I don’t know how you felt about it but.
Then guys I had a lot of fun looking at these interesting structures because it’s very fascinating to understand how billionair can actually use these complex structures to move billions of dollars across the globe just so that they could save up on taxes this is something that I absolutely love studying and I just hope you learn.
Something valuable from this case study as well that’s all from my side for today guys if you learn something valuable please make sure to hit the like button in order to make YY Baba happy and for more such insightful business and political case studies please subscribe to our Channel thank you so much for watching I will see you.
In the next one bye-bye
