Sebi questions global funds on manipulation of Adani stocks

Sebi questions global funds on manipulation of Adani stocks

The last three years have seen a wild ride for the equities of the Adani Group.

In response to two groups of foreign portfolio investors, the Securities and Exchange Board of India, or Sebi, has taken this step.

According to persons familiar with the situation, India's capital markets regulator has requested defense arguments from a number of international firms who purchased Adani Group equities in response to claims of incorrect disclosures and market manipulation.

In response to two groups of foreign portfolio investors, the Securities and Exchange Board of India, or Sebi, has taken this step. The first group, who wished to remain anonymous since the information is private, is claimed to have shorted stocks in companies run by billionaire Gautam Adani after learning that a report on short sellers will be released shortly.

Following its publication in January 2023, the short seller research from US-based Hindenburg Research immediately reduced the market value of the Adani Group by over $100 billion.

Worldwide funds with connections to the founders of the Adani Group are the second group to get Sebi's infamous "show-cause" warnings. In June 2021, they too came under heavy fire for almost allocating their whole capital to Adani equities.

According to the persons, Sebi is investigating potential investment rule infractions and is asking these funds for an explanation. The company has always denied having any connection to these money.

When asked for a remark, a Sebi official did not answer right away. There was no response from an Adani Group spokesman.

After hearing the funds' justifications, the regulator will issue a final ruling in these investigations, which may take several months or more.

Make a Line

At least domestically, Sebi's conclusions from these two extensive investigations will put an end to the Hindenburg incident. In January, the Supreme Court of India declared that after the regulator concluded its inquiry, there would be no more inquiries into this case.

According to a story in The Economic Times on Monday, the Indian markets regulator has accused the funds of violating investment limitations in listed Adani Group firms during certain times and of neglecting to keep and disclose information about their ultimate beneficial owners.

Albula Investment Fund, Cresta Fund, MGC Fund, Asia Investment Corporation (Mauritius), APMS Investment Fund, Elara India Opportunities Fund, Vespera Fund, and LTS Investment Fund are the eight investors in this group whose legal representatives are attempting to settle with Sebi by paying fines without admitting guilt, according to the media report.

Hindenburg accused the Adani Group of deceitfully inflating its stock values via a network of secret foreign funds, leading to an expansion of the Sebi investigation to include market manipulation at the Supreme Court's request. The corporation refuted Hindenburg's accusations.

The last three years have seen a wild ride for the equities of the Adani Group. Between 2020 and early 2023, several of its businesses had stock rises of over 1,000%, which increased their worth at price-earnings ratios far higher than those of their comparable companies and fueled speculation that attracted bidders.

Subsequently, shares saw a sharp decline due to the devastating impact of Hindenburg's article. Since then, Adani's stocks and bonds have mostly recovered, and the company has resumed investing and fund-raising.