NEW DELHI: The Supreme Court appointed expert committee headed by former SC Judge A M Sapre’s report emphatically declared that there was no regulatory failure on Sebi’s part during the exponential rise in share prices of Adani group companies between March 2020 and December 2022, and their morbid meltdown after publication of the Hindenburg report on January 24 this year.
In the rise and rise of the Adani share prices during this period, the committee did not find any unusual trading or participation in buying or selling of the scrips of the group companies by 12 FPIs, suspected to be linked to the group and under investigation since October 2020 for alleged violation of 25% minimum public shareholdings (MPS) norm.
However, the Committee found suspicious trading by short sellers proximate to publication of the Hindenburg report and informed the SC that these entities are being investigated. “Sebi examined whether there has been any unusual trading pattern proximate to the release of the Hindenburg report, that is for the period between January 18-31. While there was no adverse observation with respect to Adani scrips in the cash segment, suspicious trading has been observed on the part of six entities,” it said.
“These are four FPIs, which are not among the 12 FPIs suspected to be linked to Adani group and under investigation for violation of MPS norms, and one body corporate and one individual. The trading pattern (adopted by these six) is suspicious because of the build up of short positions by these entities in the Adani positions by these entities in the Adani scrips prior to the Hindenburg report, and substantial profits earned by them by squaring off their short positions after publication of the Hindenburg report on January 24,” it said.
Justice Sapre-led Committee, also comprising ex-SBI chairman O P Bhatt, former Bombay HC judge J P Devadhar, veteran banker K V Kamat, founder and non-executive chairman of Infosys Nandan Nilekani and commercial law expert Somasekhar Sundaresan, said, “a detailed investigation is being carried out in respect of the trading of aforesaid six entities.” It did not elaborate on the identities of these six entities saying that could jeopardise or compromise the ongoing probe.
The Committee was tasked by the SC to ascertain whether Sebi failed to take timely regulatory measures resulting in a meteoric rise in the share prices of Adani group companies and the dramatic crash post-Hindenburg report. The Committee said the Sebi had taken all required regulatory measures and had issued as many as 849 alerts through automates system on Adani group shares between April 2018 and December 31, 2022, of which 603 related to price volume movements and 246 for suspected insider trading.
“It is apparent that Sebi was actively engaged with developments and price movements in the market…. At this stage, taking into consideration the explanations provided by Sebi, supported by empirical data, it would not be possible for the Committee to conclude that there has been a regulatory failure around the allegations of price manipulation,” it said.
On the Sebi’s ongoing probe into MPS norm violations by FPIs linked to Adani group since October 2020, the Committee said “The investigation was not into any alleged price manipulation, considering that there was no evidence of the FPIs having manipulated the stock prices (these were not sellers) but investigation into potential violation of MPS.”
The 12 FPIs are being investigated for MPS norm violations for their alleged activities related to Adani Green Energy, Adani Power, Adani Transmission, Adani Total Gas, Adani Wilmar, Adani Enterprises, and Adani Ports and SEZ, the committee said.
The Committee said, “If none of the attendant factors that warrant a deeper and further probe (on regulatory failure) was found, and indeed Sebi kept a watch in light of its concurrent probe into suspicions about MPS (norm violations by FPIs allegedly linked to Adani group), it stands to reason that one cannot return a finding of regulatory framework.”
In the rise and rise of the Adani share prices during this period, the committee did not find any unusual trading or participation in buying or selling of the scrips of the group companies by 12 FPIs, suspected to be linked to the group and under investigation since October 2020 for alleged violation of 25% minimum public shareholdings (MPS) norm.
However, the Committee found suspicious trading by short sellers proximate to publication of the Hindenburg report and informed the SC that these entities are being investigated. “Sebi examined whether there has been any unusual trading pattern proximate to the release of the Hindenburg report, that is for the period between January 18-31. While there was no adverse observation with respect to Adani scrips in the cash segment, suspicious trading has been observed on the part of six entities,” it said.
“These are four FPIs, which are not among the 12 FPIs suspected to be linked to Adani group and under investigation for violation of MPS norms, and one body corporate and one individual. The trading pattern (adopted by these six) is suspicious because of the build up of short positions by these entities in the Adani positions by these entities in the Adani scrips prior to the Hindenburg report, and substantial profits earned by them by squaring off their short positions after publication of the Hindenburg report on January 24,” it said.
Justice Sapre-led Committee, also comprising ex-SBI chairman O P Bhatt, former Bombay HC judge J P Devadhar, veteran banker K V Kamat, founder and non-executive chairman of Infosys Nandan Nilekani and commercial law expert Somasekhar Sundaresan, said, “a detailed investigation is being carried out in respect of the trading of aforesaid six entities.” It did not elaborate on the identities of these six entities saying that could jeopardise or compromise the ongoing probe.
The Committee was tasked by the SC to ascertain whether Sebi failed to take timely regulatory measures resulting in a meteoric rise in the share prices of Adani group companies and the dramatic crash post-Hindenburg report. The Committee said the Sebi had taken all required regulatory measures and had issued as many as 849 alerts through automates system on Adani group shares between April 2018 and December 31, 2022, of which 603 related to price volume movements and 246 for suspected insider trading.
“It is apparent that Sebi was actively engaged with developments and price movements in the market…. At this stage, taking into consideration the explanations provided by Sebi, supported by empirical data, it would not be possible for the Committee to conclude that there has been a regulatory failure around the allegations of price manipulation,” it said.
On the Sebi’s ongoing probe into MPS norm violations by FPIs linked to Adani group since October 2020, the Committee said “The investigation was not into any alleged price manipulation, considering that there was no evidence of the FPIs having manipulated the stock prices (these were not sellers) but investigation into potential violation of MPS.”
The 12 FPIs are being investigated for MPS norm violations for their alleged activities related to Adani Green Energy, Adani Power, Adani Transmission, Adani Total Gas, Adani Wilmar, Adani Enterprises, and Adani Ports and SEZ, the committee said.
The Committee said, “If none of the attendant factors that warrant a deeper and further probe (on regulatory failure) was found, and indeed Sebi kept a watch in light of its concurrent probe into suspicions about MPS (norm violations by FPIs allegedly linked to Adani group), it stands to reason that one cannot return a finding of regulatory framework.”