Adani-Hindenburg Case: Supreme Court Panel Does Not Find Regulatory Failure

Foreign portfolio investors in the Adani Group stocks are compliant with SEBI's regulations and there has been no regulatory failure in the Adani-Hindenburg matter, according to the expert committee constituted by the Supreme Court.

"The securities markets regulator suspects wrongdoing but also finds compliance with various stipulations in the FPI Regulations," the report by the committee constituted on March 2 said. BQ Prime has reviewed a copy of the report.

The committee also said that, based on the market regulator's investigation, there is no pattern of artificial trading or wash trades in the Adani Group stocks.

SEBI was asked to examine allegations of price manipulation in Adani stocks around the Hindenburg report. Several entities had taken short positions prior to the publication of the Hindenburg report, and since SEBI's investigation into it is underway, the committee has chosen not to comment on the merits of this issue.

The committee report admits that there was high volatility in the stock market after the publication of the Hindenburg report. However, it concludes that the Indian market as a whole was not unduly volatile during the period.

The committee said the impact of Adani Group-related events on the overall market was low, on account of its index weightage being nil in the Sensex-30 and around 2% in the Nifty 50.

It has been noted that volatility is not an inherent vice for the market. And mitigating measures from Adani Group, such as paring down the debt and infusing fresh investment, have built confidence in stocks. "The market has repriced and reassessed Adani stocks. While they may not have returned to the pre-Jan. 24, 2023 levels, they are stable at the newly priced level."

It is also stated that retail investors’ exposure to Adani stocks has increased after the publication of the Hindenburg report.

Finally, the committee was asked to examine the regulatory failure of SEBI on three fronts: minimum public shareholding norms, related-party transactions, and stock price manipulation.

The committee said SEBI has found compliance with various regulations on disclosure of beneficial ownership by FPIs invested in Adani stocks. On related-party transactions and minimum public shareholding allegations, SEBI has sought more time. And so, as the committee pointed out, it would not be possible to return to a finding of regulatory failure on these two issues.

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