Following mayhem in markets, after the publication of a report by US-based firm Hindenburg Research, the Supreme Court had ordered the setting up of an expert committee to examine the issues raised by l’affaire Adani. The formation of the committee had, even then, touched off concerns that it raises doubts about the investigative capacity of the Securities Exchange Board of India (SEBI). Last week, this expert committee submitted its report. The report delineates the issues raised, the regulator’s investigations, and its broad findings in the matter and concludes that there is no evidence of regulatory failure. Basically, no one is any the wiser.
Take the issue of minimum public shareholding and foreign portfolio investors. This matter revolves around whether the 13 overseas entities (including 12 foreign portfolio investors), that hold Adani Group stocks, are compliant with disclosure norms. As per the committee’s report, the regulator has uncovered 42 contributors to the assets under management of these overseas entities. But, the “ultimate chain of ownership” in these entities is not clear. The regulators in the jurisdictions where these contributors are located have not provided the SEBI with any information. The committee notes that the “legislative policy” stance of the regulator has moved in the opposite direction of its “investigation and enforcement” — the provision requiring FPIs to disclose “every ultimate natural person” at the end of every chain in the FPI was removed. So, while the regulator may well suspect “wrongdoing”, it has “drawn a blank” because of this odd “dichotomy”. On the equally contentious issue of the Adani Group’s share price movements, while concerns had been voiced over the companies trading at valuations considerably higher than those in the same sector, “no evidence of any artificiality to the price rise” has been found. Further, the rise in share prices could not be attributed to “any single entity or group of connected entities”.
The Supreme Court has given the SEBI till August 14 to complete its probe in the matter. Considering the wider implications of such an investigation — the Adani Group holds sway across large parts of the economy — the regulator would do well to provide greater clarity than the committee has done on the issues raised, address the questions that remain unanswered, and bring finality to the matter. SEBI’s duty must be towards safeguarding the interests of investors, and preserving the integrity of the Indian stock market.
