A committee appointed by the Supreme Court has revealed that six entities, including four foreign portfolio investors (FPIs), are being investigated for engaging in suspicious trading in Adani group shares before the release of the Hindenburg report. The report, published on January 24, accused the Adani empire of stock manipulation and accounting fraud. It claimed that significant short positions were taken in Adani shares before the report’s release, resulting in substantial profits when the stocks crashed.
The expert committee, led by former Supreme Court judge AM Sapre, found no regulatory failure during the sharp rise and subsequent decline in Adani group stock prices. However, it identified suspicious trading by the six entities, including FPIs, a body corporate, and an individual. The committee highlighted the build-up of short positions by these entities before the release of the Hindenburg report, followed by significant profits earned by closing these positions afterward.
While the report did not disclose the names of the entities under investigation, it emphasized that a detailed probe into their trading activities is ongoing. The committee refrained from providing specific details or commenting on the quality of the evidence at this stage, to protect the interests of the parties involved and ensure the integrity of the ongoing investigations.
The Enforcement Directorate (ED), a financial crime-fighting agency, has discovered potential violations and concerted selling by specific parties ahead of the Hindenburg report’s publication. The ED believes these actions may constitute credible charges of destabilizing the Indian markets, urging the Securities and Exchange Board of India (SEBI) to investigate such activities under securities laws.
Regarding Adani Enterprises Ltd (AEL), the committee examined the trading patterns of its shares between March 1, 2020, and December 31, 2022. The analysis revealed that Life Insurance Corporation (LIC) suffered significant losses by selling 50 lakh shares at lower prices and subsequently purchasing 4.8 crore shares at higher prices. However, the committee found no evidence of price manipulation by Adani-linked firms.
SEBI informed the committee that although AEL share prices rose significantly, no single entity or group of concentrated entities exhibited a manipulative contribution to the price increase.
The investigation into the suspicious trading activities aims to ascertain the nature and extent of any wrongdoing and maintain the integrity of the Indian financial markets.
