A Supreme Court-appointed panel, whose task was to see if India's market regulator played its role in protecting the interest of small investors in Adani Group stocks, has made its report public. The panel has found that the Securities and Exchange Board of India (SEBI) suspects that 13 foreign funds invested in the Adani Group may have links with the promoters.

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The latest report from the Supreme Court panel revealed that the SEBI investigation into the Adani Group shareholding has been on since October 2020 but there's no conclusive evidence yet in favour of the Adani Group or against it.

Also Read: Adani-Hindenburg Row highlights | SEBI granted extension of time till August 14

While the allegations made the US-based short seller Hindenburg reinforced SEBI's suspicions, the foreign funds have not been able to demostrate that their beneficial owners aren't funded by the Adani Group, the panel added.

India's apex court had appointed an expert panel along with markets regulator SEBI to investigate the drop in Adani Group shares, triggered by Hindenburg Research's fraud allegations.

The report further said that the investor confidence in Adani Group companies was shaken post the Hindenburg report as shares saw high volatility over the next few trading sessions. The expert panel was headed by retired Supreme Court Justice AM Sapre and comprised of former SEBI chief OP Bhatt, former chief of the BRICS Bank KV Kamath, Nandan Nilekani (non-executive Chairman at Infosys) and advocate Somsekhar Sundaresan (who was recently nominated to be a judge at the Bombay High Court).

SEBI has found 42 contributories to the assets under management of the 13 overseas entities and has been pursuing various avenues to ascertain the same. "It has been a long-standing suspicion of SEBI that some of the public shareholders are not truly public shareholders and could be fronts for the promoters of these companies," the report further added.

But the suspicions are yet to be proven. Despite pursuing various routes through the Central Board of Direct Taxes, Enforcement Directorate etc., SEBI has not determined the ultimate ownership of these 13 entities.

“SEBI now has its hands full, and SEBI will have to work very hard in next two-and-a-half months and come up with a proper report before August 15, as advised by the Supreme Court.” HP Ranina, Senior Advocate of the Supreme Court told CNBC-TV18.

The report has also recommended that in complex matters, the law must allow setting up an investigative committee with members from various investigating agencies. Such multi-agency investigation committee may be setup under the aegis of the Financial Stability and Development Council.

Shares of Adani Enterprises have recovered from the day's low and are currently trading 3.7 percent higher at Rs 1,960.90. Most of the other Adani Group companies have also recovered from the day's low and are trading higher, barring Adani Total Gas, which is locked in a 5 percent lower circuit.

In this week alone, the combined market value of Adani Group stocks has fallen $10 billion after MSCI Inc decided that it would drop two of the group entities from its India gauge citing concerns over potential equity dilution from a fundraising plan. Read more about it here.

Sandeep Parekh, Managing Partner at Finsec Law Advisors in an interview to CNBC-TV18 said, "The committee has not found evidence of manipulation and minimum public shareholding violation. The only issue they have found is whether there is opacity in terms of the end beneficial owners."

JN Gupta, Former Executive Director of SEBI said, "In this entire episode, to me it appears to be an orchestra that was operating. Hindenburg came and the timing was at the time of FPO and then all political parties and everybody started singing in the same tune. The political parties were saying that they are protecting and seeking protection for retail investors but they knowingly or unknowingly caused more loss to the retail investors because their political problem caused the prices to fall."

First Published:May 19, 2023 1:08 PM IST