Adani-Hindenburg case: Can’t conclude regulatory failure, says SC panel

The Supreme Court has released a report on the Adani-Hindenburg case, submitted by the A.M. Sapre committee, which states there was no prima facie violation of existing rules or law, and that it can't be concluded that there has been a regulatory failure around price manipulations.

The Sapre committee report says it is apparent that SEBI (Securities and Exchange Board of India) was actively engaged with developments and price movements in the market. "The committee notes that all such investigations must be completed in a time-bound manner. At this stage, taking into account the explanations provided by SEBI, it would not be possible to conclude that there has been a regulatory failure around the allegations of price manipulations," the committee has observed.

The panel report says the Adani group had disclosed all beneficial owners and that there was no charge by SEBI that it is rejecting Adani's declaration of beneficial owners. It said there were short-selling profits made by entities after the Hindenburg report, which need to be probed.

On SEBI’s probe into the shareholding of the foreign portfolio investors in the Adani-listed companies, the panel report said: "The foundation of SEBI’s suspicion that led to investigations into the shareholding of the FPIs in the Adani-listed companies is that their ownership structure is "opaque" because the ultimate chain of ownership above the 13 overseas entities holding Adani Group stocks is not clear.”

Drawing a caveat due to the ongoing SEBI probe into the Adani-Hindenburg matter, the panel also says the market regulator still does not have enough info on 13 overseas entities and 42 contributors to assets under management.

The panel also acknowledges that retail shareholders of Adani have gone up after the Hindenburg report. It has now been left to SEBI to decide if pending the discovery of 13 entities, whether why a further case is to be made. It also acknowledges the fact that the Adani stocks have stabilised at new price discovery without destabalising Indian markets.

After the US-based short seller Hindenburg Research released an adverse report against the Adani group on January 24, 2023, the SC directed the SEBI to probe the matter with regard to violations of securities (regulation) rules, related party rules, and stock manipulation.

A committee was also constituted to provide an overall assessment of the situation; suggest measures to strengthen investor awareness; and investigate if there's been any regulatory failure. The panel was also formed to strengthen the statutory or regulatory framework and secure compliance with the existing framework for the protection of investors.

The Supreme Court (SC) on Wednesday granted capital markets regulator SEBI an extension of three months till August 14, 2023, in relation to the regulator's inquiry into the Adani Group-Hindenburg case.

SEBI on May 12, 2023, had sought additional six months' time to complete the probe in the Adani-Hindenburg case, saying this much time is required “to ensure that justice is carried out while keeping the interest of investors”.

As per the SC, after granting two months of an extension earlier, it has granted additional three months' extension to the regulator with regards to the Adani-Hindenburg case. It said SEBI must share the status of the inquiry by August 2023.

SEBI, meanwhile, had earlier said the allegations that it is probing Adani Group since 2016 are factually “baseless”. It said global depository receipts (GDRs) had been issued against 51 listed companies, in respect of which an investigation was conducted. However, no listed company of Adani Group was part of the aforesaid 51 companies.

Amid the development, all Adani group stocks are trading in the positive territory despite a weaker broader market, with Adani Wilmar, Adani Transmission, and Adani Ent surging the highest at 6.3%, 5%, and 4.2%, respectively.