Sunday, May 26, 2024

SC clears Adani Group of Trading Irregularities

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In March 2023 the Supreme Court appointed a panel to investigate the charges against Adani Group. This panel was headed by former apex court judge, Justice AM Sapre. Its main task was to shed light on allegations made against the Adani group by the Hindenburg Research report. 

In May 2023, the SC cleared the Adani group of charges based on the prima facie evidence submitted to the court. The SEBI conducted an in-depth investigation into trading patterns since 2016 for the Adani Group. Adani Groups was cleared of charges for stock price manipulations and contravention of trading laws. The committee questioned regulatory failure by SEBI in the light of this case. The SC has asked SEBI to complete its final probe by August 2023. 

What were charges against Adani Group?

Adani-Hindenburg case: Not possible to conclude that there was a regulatory failure on price manipulation allegation, Sapre panel to SC - BusinessToday
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There were three main areas of investigation for the SC appointed committee. Firstly, to check if Rule 19A of the Securities was violated. This rule specifies that every listed company should maintain 25% public shareholding of its public shareholding. Secondly,  to check if there was a failure to disclose transactions or information in accordance with SEBI norms. And lastly, to check for stock prices manipulation in contravention of trading laws.

Finding of the investigation into Adani Group

SC gives SEBI three months more for probe into Hindenburg report on Adani group
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SEBI did not find patterns of artificial trading among the same parties in the Adani case. They specified that there were patches of price rise; however, no coherent pattern of non-regulatory trading was observed.

The minimum public shareholding for Adani Group was also satisfactorily resolved. SEBI considered 13 overseas entities as a subgroup of Adani.

Of the 13 entities, 12 are foreign portfolio investors. All transactions and the identities of the 13 entities were duly disclosed as per SEBI regulations. Thus, all three charges were cleared. 

The Justice Sapre committee stated that SEBI had found that some entities had taken short positions on Adani shares prior to the publication of the Hindenburg report. These entities profited from squaring off their positions after the Adani group share price crashed upon the publication of the report.

Consequences of the Hindenburg Research Report

SEBI will now investigate those parties that benefited from the publication of the Hindenburg Research report and the subsequent crash in share prices for Adani Group. The committee strongly questioned the extrapolation and misrepresentation of facts in the report. The committee further stated that the report was based only on publicly available information. The Hindenburg Report also played havoc in the political arena of India. Opposition parties raised slogans against the government in the name of Adani Group. This report also tarnished the BJP government’s public image. Consequently, it may have played a hand in the losses faced by BJP in the subsequent state legislative assembly elections.

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