Supreme Court Appointed Committee Finds No Regulatory Failure in Adani Group, SEBI’s Investigation Inconclusive
Sebi’s investigation of the Adani case turned up nothing wrong, according to a committee named by the Supreme Court. A Supreme Court-appointed expert committee said it had found no proof of stock price manipulation in Adani group companies.
This is good news for billionaire Gautam Adani, who has been in trouble. A separate Sebi investigation into alleged illegal money flows from offshore entities has also “drawn a blank.”
The six-person panel, on the other hand, said there was evidence of a rise in short positions on Adani Group stocks before the report by US-based short seller Hindenburg Research that accused the apples-to-port group of fraud, stock manipulation, and money laundering.
After the damning accusations were made public and prices fell, positions were evened out to make money. Enforcement Directorate (ED), an agency that fights financial crime, cited a response and said:
We found intelligence about potentially violative and concerted selling by specific parties just ahead of the publication of the Hindenburg report, and this may lead to credible charges of concerted destabilization of the Indian markets, and Sebi ought to be probing such actions under securities laws.
Six companies have been seen making trades that look fishy. Four of these are Foreign Portfolio Investors (FPIs), one is a corporation, and one is a person.
You can also refer to the tweets linked below for reactions of people regarding this latest update:
SC appointed Panel gives clean chit to Adani Group.
Bad day for people who were on payroll of Hindenburg & Soros.
— News Arena India (@NewsArenaIndia) May 19, 2023
Adani Group takes steps to reassure retail investors, leading to a multifold increase in retail investment exposure. Confidence restored as SC committee gives clean Chit To Adani ! Adani Gets Clean Chit pic.twitter.com/xWGLT2bS9a
— Arpita Shaivya (@arpispeaks) May 19, 2023
In its 173-page report, the committee, which was led by a former Supreme Court judge named Justice AM Sapre, said that based on data from the Securities and Exchange Board of India (Sebi), it saw “no evident pattern of manipulation” in the sharp rise in stock prices of billionaire Gautam Adani’s companies that can be linked to “any single entity or group of connected entities.”
In the study, the panel said that it was impossible to say whether there had been problems with how prices were set. After the Hindenburg report caused a political fight and caused the conglomerate’s stocks to drop, Adani was no longer the third richest person in the world.
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On March 2, the Supreme Court set up an expert committee to investigate whether transactions with related parties were not disclosed and whether stock prices were manipulated. The group was supposed to work alongside Sebi’s investigation into offshore companies that had invested in the Adani Group.
First, the supervisor was given two months to finish the investigation. Then, they were given another three months until August 14. These three things were at the heart of Hindenburg’s accusations against Adani.
Even though the story is not the last word, it is good news for Adani’s empire. After the study was made public, all 10 Adani Group stocks increased by 1.2% and 7% in late trading.
Flagship Adani Enterprises Ltd. and Adani Ports and Special Economic Zone Ltd. made up for the day’s losses and went up by 3.5%. In its report, the panel said that Sebi has “drawn a blank” in its probes of possible violations in the Adani group’s foreign investments and that pursuing the case could be a “journey without a destination.”
Sebi has found 42 contributors to the funds managed by the 13 foreign entities and has been trying to learn more about them differently.
Even though the FPIs in question made declarations of the beneficial owner by naming the natural people who made choices for them, a 2018 law removed the need to call the last natural person who had any economic interest in an FPI.
Since October 2020, Sebi has been looking into who owns the 13 companies in other countries.
“The securities market regulator suspects wrongdoing but also finds compliance with various stipulations in attendant regulations. Therefore, the record reveals a chicken-and-egg situation,” it said.
Before the Hindenburg report, which took about USD 145 billion off the conglomerate’s market value at its lowest point, Adani Group stocks had gone up more than 1,000% since early 2020, bringing the conglomerate’s total market value to a high of USD 288 billion in September. The value of the whole Adani Group on the stock market is now close to USD 160 billion.
The runaway rallies in the seven long-standing Adani Group firms, excluding last year’s purchases of two cement companies and broadcaster NDTV, raised fears, including by Hindenburg, that there was a concerted effort by some entities to bid up valuations.
All of the accusations have been called lies by the Adani Group, which says it follows all laws and is honest with the public. Sebi is looking into claims that rules about related-party transactions, public ownership, and share price manipulation have been broken.
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The committee said that empirical data showed that retail buyers’ exposure to Adani stocks increased after January 24, 2023. So, it concluded that the Indian stock market as a whole wasn’t too unstable during the period in question.
The Adani Group has been working on a plan to get back on its feet. This plan includes paying off some debt, buying back some bonds, bringing in new money through a private equity investor’s purchase of a nearly USD 2 billion stake, and raising Rs 21,000 crore through two group companies.