Adani Share Price Crash: Sebi Investigation Reveals Profiteering Entities

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Adani Share Price Crash Investigation

In a recent development regarding Adani Share Price Crash, the Securities and Exchange Board of India (Sebi) has conducted an investigation into the highly publicized Adani vs Hindenburg saga. The investigation has uncovered a startling revelation: certain entities capitalized on the massive slump in the stock prices of billionaire Gautam Adani’s companies.

According to a report released by a panel appointed by the Supreme Court, “Sebi has also found that some entities have taken short positions prior to the publication of the Hindenburg report and have profited from squaring off their positions after the price crashed upon publication of the report.” However, the committee refrained from expressing any opinion on the merits of the issue, as it is still under investigation.

Regulatory Framework and Surveillance

The report emphasized that it would be unfair to attribute any regulatory failure to Sebi in this matter. It stated, “Suffice it to say, it would not be possible to return a finding of regulatory failure on this count since SEBI has an active and working surveillance framework to take notice of high price and volume movements and has applied itself to the data generated by such surveillance, applying objective criteria, to consider if the integrity of the natural price discovery process has been manipulated.”

Erosion of Market Capitalization

Between January 24 and February 27, the market capitalization of Adani stocks witnessed a significant erosion in value, amounting to approximately Rs 12.4 lakh crore. By March 9, this figure had further declined to Rs 10 lakh crore.

As per the panel’s analysis, which drew data from Sebi, the retail investors incurred a loss of about Rs 3,700 crore in Adani stocks. When factoring in the losses of other individuals, including high net worth individuals (HNIs), the total loss surged to a staggering Rs 22,000 crore.

To calculate these losses, Sebi excluded the shares acquired by individuals after the Hindenburg report and adjusted for net selling by individuals exceeding their holdings on January 24, subsequent to the report’s publication.

Current Status and Market Reassessment

Following the panic selling, the market has since repriced and reassessed Adani stocks. The committee, chaired by retired judge Justice AM Sapre, stated, “While they may not have returned to the pre-January 24, 2023 levels, they are stable at the newly re-priced level.”

At present, Sebi is still investigating the matter, and based on the available evidence and data, the panel has not reached a conclusive determination regarding any regulatory failure on Sebi’s part. The Supreme Court has granted Sebi an extension until August 14 to complete its investigation.

The Panel and the Report

The six-member panel, appointed by the apex court, comprised eminent individuals such as Infosys co-founder Nandan Nilekani and banking veteran K V Kamath. They sought consultations from Nithin Kamath, co-founder of Zerodha, as well as Nimesh Kampani, the founder of AMFI and JM Financial.

Following the public release of the comprehensive 178-page report, Adani stocks witnessed a rally of up to 4%. Notably, Adani Transmission and Adani Power emerged as the frontrunners in this upward trend. However, Adani Total Gas remained in the red zone, being the only stock in the 10-pack strong group catalogue to exhibit a decline in value.

In conclusion, Sebi’s investigation into the Adani vs Hindenburg saga has shed light on entities that profited from the significant drop in the share prices of Gautam Adani’s companies. While the committee has refrained from making a final determination regarding regulatory failure, it highlighted Sebi’s active surveillance framework and its commitment to ensuring the integrity of the price discovery process. As the investigation continues, the market has experienced a reevaluation of Adani stocks, albeit at adjusted levels. With the Supreme Court granting Sebi additional time, the industry eagerly awaits the outcome of this high-profile investigation.