‘No Prima Facie violation of Laws’: SC committee’s report on Adani Group probe, 11 key takeaways

The Supreme Court-appointed expert committee formed to investigate the Adani-Hindenburg dispute has stated that it would be impossible for it to conclude that there was a regulatory failure surrounding the allegation of price manipulation.

“At this stage, taking into account the explanations provided by SEBI, supported by empirical data, prima facie, it would not be possible for the Committee to conclude that there has been a regulatory failure around the allegation of price manipulation,” the expert committee said in its report submitted to the apex court earlier this month. The committee said its remit was not to examine whether the price rise was justified and it was to ascertain if there was a regulatory failure.

The committee noted that it is apparent that SEBI was actively engaged with developments and price movements in the market.

It also said that empirical data showed that retail investors’ exposure in the group has increased after January 24, 2023, when the Hindenburg report came out. The committee also concluded, based on empirical evidence, that the Indian market as a whole was not “unduly volatile”.

“The volatility in the Adani stocks was indeed high, which is attributable to the publication of the Hindenburg report and its consequences,” the committee said. The market has re-priced and re-assessed the Adani stocks.

“While they may not have returned to the pre-January 24, 2023 levels, they are stable at the newly re-priced level,” the committee added. It also said volatility is not an “inherent vice” for the market.

“Market participants place buy and sell orders in line with their demand and supply, and based on their assessment and expectations, which is in turn, based on their assessment of the information available to them, and its anticipated impact.”

Key Takeaways of the Adani SC report:

1. Adani Group has disclosed all beneficial owners.
2. No charge by SEBI that they are rejecting Adani’s declaration of beneficial owners.
3. Retail shareholding of Adani has gone up after Hindenburg Report.
4. There were short selling profits made by entities after Hindenburg which need to be probed.
5. No Prima Facie violation of existing laws or rules have been found.
6. Report draws Caveat due to ongoing SEBI probe.
7. Report says SEBI still does not have enough information on 13 overseas entities and 42 contributors to assets under management.
8. Report leaves to SEBI to decide if pending discovery of 13 entities whether any firther case is to be made.
9. Report finds that SEBI while referring case to ED, did not make Prima Facie charge.
10. Report finds that Adani stocks have stabilized at new price discovery without destabilizing Indian markets.
11. Report acknowledges efforts by Adani to stabilize stocks.