According to the Supreme Court-appointed expert committee, six individuals, which involves four foreign portfolio investors (FPIs), are being investigated for questionable trading in Adani group shares before the publication of the Hindenburg report. None of the six were given names in the report. Regarding the trading of the six entities, a thorough investigation is being carried out. The Committee does not delve into the specifics and names of these individuals or make any judgements on the reliability of the evidence provided by the prima facie evidence because these are matters that are still under investigation.
The report stated that the committee wanted to make sure that the positions of the various stakeholders, including SEBI, were not jeopardized in any manner while investigations were ongoing.
Prior to the Hindenburg report’s January 24 release, there had been an accumulation of short positions in the Adani scips, and significant profits had been realised as the stock market fell, stated that report.
- Selling a stock that one does not own is typically considered a “short” position.
- Short-selling investors think the stock’s price will fall in value.
- In the event that the price falls, they can purchase the stock and profit.
According to Hindenburg’s assessment, the Adani enterprise participated in “brazen stock manipulation and accounting fraud scheme” and was the “biggest con in corporate history.” After the report was released on January 24, Adani Group shares decreased despite the company’s denial of all claims comparing the study to an attack on India.
The Supreme Court established the expert committee on March 2 to look into any failure to disclose transactions with related parties and any potential stock price manipulation as the report sparked a political controversy and petitions for an investigation into the empire led by billionaire Gautam Adani were filed.
The expert committee led by former SC judge Justice A M Sapre found no evidence of regulatory failure during the significant price collapse of Adani group enterprises after January 24 or the rapid spike in prices between March 2000 and December 2022.
While there were no unfavourable findings on Adani scips in the cash market, six entities have been involved in suspicious activity. The study stated that there were four FPIs, one body corporate, and one individual.
The expert committee stated, “The trading pattern here is suspicious because these entities built up short positions in the Adani scrips prior to the Hindenburg report, and they made significant profits by squaring off their short positions after the Hindenburg report’s publication on January 24, 2023.”
Enforcement Directorate (ED), a financial crime-fighting organisation, discovered information about potentially illegal and concerted selling by specific parties just before the release of the Hindenburg report. This may result in credible allegations of concerted market destabilisation in India, and Sebi should be looking into such actions under securities laws, it said, quoting a response from ED.
The state-owned LIC was the biggest loser, according to the report, as it sold off 50 lakh shares of the company when prices were around Rs. 300 and bought 4.8 crore shares when the prices ranged between Rs. 1,031 and Rs. 3,859. This happened between March 1, 2020, and December 31, 2022, a month before publication of the Hindenburg report and the meltdown of Adani shares.
The committee thoroughly examined the movement of the price of Adani shares and the sale and acquisition of those shares by various businesses, but it was unable to uncover any proof of stock price manipulation by companies connected to the Adani group.
Four time periods—March 1, 2020–August 31, 2020 (Patch-1), September 1, 2020–September 30, 2020 (Patch-2), October 1, 2020–March 31, 2021 (Patch-3) and April 1, 2021–December 31, 2022 (Patch-4)—were used to study the trading of AEL shares.
Despite the fact that the price of AEL shares increased dramatically, there was no clear pattern of price manipulation that could be linked to a single company or collection of concentrated companies, SEBI informed the investigation committee.
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