Market regulator Securities and Exchange Board of India (SEBI) is undertaking an investigation into the market allegations against the Adani group of companies, the Centre informed Parliament on Monday.
Minister of State for Finance Pankaj Chaudhary said in the Lok Sabha that the nine listed companies forming part of the Adani group witnessed a decline of around 60% of market capitalisation from January 24, 2023, till March 01, 2023, after a report published by US-based short seller Hindenburg Research. "The volatility in the stocks of these companies has not had any significant impact at the systemic level," says the MoS.
The SEBI, as the statutory regulator of securities markets, is mandated to put in place regulatory frameworks for effecting stable operations and development of the securities markets, including the protection of investors. As per its mandate, it conducts investigations into any alleged violations of its regulations by any market entity, the minister said.
Whether any adverse impact was reported in the share value of companies in the country due to the said report, the minister said Nifty 50 declined by around 4.5% during the same period.
On the question of whether the government proposes to restrict the disbursement of further loans to the likes of the Adani group of companies from nationalised banks and financial institutions of the government, the minister said as per the Reserve Bank of India (RBI), banks are free to take credit-related decisions based on internal assessment of the commercial viability of the loan within their board approved policies and within RBI’s prudential guidelines.
"Further, RBI has informed that under the provisions of section 45E of the Reserve Bank of India Act, 1934, RBI is prohibited from disclosing credit information," he said.
Notably, the Supreme Court earlier this month constituted a panel headed by a retired judge, Justice AM Sapre, to examine alleged violation of market laws by Adani Group and other listed companies. The apex court expert committee includes former SBI chairman OP Bhatt, Justice JP Devdatt, veteran banker KV Kamath, Infosys co-founder Nandan Nilekani and advocate Somasekhar Sundaresan.
The panel will provide an overall assessment of the situation, including the relevant causal factors which have led to the volatility in the securities market in the recent past. The committee will investigate whether there has been a regulatory failure in dealing with the alleged violation of laws pertaining to the securities market. The expert panel will also suggest measures to strengthen investor awareness and the statutory and regulatory framework. The committee has been asked to submit its report to the Supreme Court in a sealed cover within two months.
On January 24, 2023, U.S. short-seller Hindenburg Research accused the Gautam Adani-led conglomerate of “pulling the largest con in corporate history”. The conglomerate, however, called the allegations “malicious”, “baseless” and a “calculated attack on India”.
In February, SEBI said it has put in place “a set of well-defined, publicly available surveillance measures” to address excessive volatility in “specific stocks”. “In all specific entity-related matters, if any information comes to SEBI’s notice, then, as per extant policies, the same is examined and after due examination, appropriate action is taken,” the capital markets regulator had said.
Adani Group’s flagship firm Adani Enterprises had also called off its fully subscribed follow-on public offer (FPO) earlier this year after the 106-page Hindenburg report triggered a selloff in Adani stocks.