Delhi News

No clean chit to Adani by SC panel – only a JPC can unearth the full truth

Has the report of the Supreme Court’s Expert Committee given a “clean chit” to the Adani Group? That’s what sections of the media have been asserting with a note of desperation. Because even a cursory reading of the report makes it clear that it has done nothing of the sort. It essentially says it cannot make a finding of regulatory failure because the Securities and Exchange Board of India (SEBI), which oversees India’s securities markets, has not been able to conclude its investigations. What’s more, the challenges of unravelling the opaque transactions around Adani is why SEBI was given an extension until August 14. Any chit, dirty or clean, will have to wait until then.

The report is a reminder that SEBI diluted the reporting requirements of the ultimate beneficial (i.e. actual) ownership of foreign funds. This occurred after Prime Minister Narendra Modi’s refrain regarding his government’s efforts to “eliminate safe havens for economic offenders” and remove the “excessive banking secrecy that hides the corrupt and their deeds”.

This report only strengthens the Congress party’s position, stated by the communications in charge, Jairam Ramesh, that “the Supreme Court Committee has very limited terms of reference” that “cannot bring out the deep nexus between PM and Adani.” This is exactly why the opposition has called for a Joint Parliamentary Committee (JPC) for a genuine investigation, which we will come to later.

After the major selloff in Adani shares that was sparked by the publication of the Hindenburg report, the Expert Committee was tasked on March 2 to report on four aspects of this market crash. Three of these were assessing the causes of market volatility, suggesting ways to strengthen investor awareness and suggesting measures to improve securities regulations and compliance. The fourth, and arguably the most important, objective was to “investigate whether there has been regulatory failure in dealing with the alleged contravention of laws pertaining to the securities market in relation to the Adani Group or other companies”.

Relatedly, the Supreme Court on March 2 also asked SEBI to investigate three potential regulatory violations by the Adani Group: 1) whether the Adani Group had violated the minimum public shareholding requirement of 25 per cent; 2) whether it had failed to disclose transactions with related parties; and 3) if there had been any illegal manipulation of Adani stock prices.

And what does the Expert Committee report tell us? Regarding the violation of the minimum shareholding requirement, the report makes it clear that “the very requirement to disclose the last natural person above every person owning any economic interest in the FPI was done away with in 2018 pursuant to a recommendation of a Working Group and the provisions on ‘opaque structure’ were deleted on the premise that declarations under the PMLA constitute sufficient compliance”.

This explains why SEBI’s investigation of the ownership of the 13 overseas Adani-related entities since October 23, 2020, has gone nowhere. The report says: “The securities market regulator suspects wrongdoing, but also finds compliance with various stipulations in attendant regulations… It is this dichotomy that has led to SEBI drawing a blank worldwide, despite its best efforts.” Specifically, it has been unable to get any information from regulators in the Cayman Islands, Malta, Curaçao, the British Virgin Islands and Bermuda. Does that sound like a clean chit?

Among the allegations made against the Adani Group was that it used related-party transactions — in many cases undeclared — to move funds in and out of companies. The Expert Committee report states that SEBI is investigating “12 suspicious transactions”. It adds that the definitions of “related party” and “related party transactions” in the 2015 SEBI (Listing Obligations and Disclosure Requirements) Regulations have been changed several times since SEBI began its investigation. This means that SEBI has been responding to market feedback by amending regulations, and hence cannot be said to have failed in its regulatory duties. The report clearly adds that “SEBI is still investigating the matter”. Does that read like a clean chit?

Here, the Expert Committee states that “in a nutshell, no pattern of artificial trading or ‘wash trades’ among the same parties multiple times was found.” Since SEBI has been closely monitoring price volatility and applying various surveillance measures as necessary, the report states that it cannot be accused of regulatory failure on this front.

To sum up, the Expert Committee report states that SEBI “suspects wrongdoing” regarding minimum public shareholding limits. On related parties, it has found “12 suspicious transactions”. However, it has not conclusively found evidence of price manipulation by Adani-related entities. In no sense is this a clean chit to Adani.

It is also important to remember that the Congress party’s 100 “Hum Adani ke Hain Kaun” (HAHK) questions were much broader than the remit of the Expert Committee, and remain entirely valid. The circumstances in which the Adani Group has a monopoly in critical sectors; how assets in power, ports and energy in Bangladesh and Sri Lanka were handed over to Adani in the name of diplomacy; who decided that LIC and SBI would lend or invest substantial sums in Adani Group — only a JPC can unearth the full truth. PM Narasimha Rao started a JPC in 1992 to investigate the Harshad Mehta scam. In 2001, PM Atal Bihari Vajpayee agreed to a JPC to unravel the Ketan Parekh scam. One was a Congress leader, the other from the BJP. What, then, is Prime Minister Narendra Modi afraid of?

The writer is a member of the Indian National Congress.

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Delhi News

Six entities under lens for suspicious trading in Adani shares: Supreme Court panel

Six entities including four foreign portfolio investors (FPIs) are under the lens for suspicious trading in Adani Group shares prior to the release of the damning Hindenburg report, the Supreme Court-appointed expert committee has said.

There was a build up of short positions in the Adani scips prior to the January 24 release of the Hindenburg report, and substantial profits were booked thereafter as stocks crashed, the 178-page report said.

A “short” position is generally the sale of a stock one does not own.

Investors who sell short believe the price of the stock will decrease in value. If the price drops, they can buy the stock at the lower price and make a profit.

Also Read | Hindenburg-Adani case | Supreme Court-appointed expert panel ‘clears’ SEBI

Hindenburg’s report claimed that the Adani empire was the “biggest con in corporate history” engaged in a “brazen stock manipulation and accounting fraud scheme”.

Shares of Adani Group, which denied all allegations, likening the U.S. investment firm’s report to an attack on India, fell after the Hindenburg report was published on January 24.

As the report stirred a political row and petitions were filed for a probe into the empire helmed by billionaire Gautam Adani, the Supreme Court on March 2, constituted the expert committee to investigate if there was any failure to disclose transactions with related parties and if stock prices were manipulated.

The expert committee headed by former SC Judge A.M. Sapre found no regulatory failure during the sharp rise in prices of Adani Group companies between March 2000 and December 2022 and their dramatic meltdown after January 24.

“While there was no adverse observation with respect to Adani scips in the cash segment, suspicious trading has been observed on the part of six entities. These are four FPIs, one body corporate and one individual,” the report said.

The report did not name any of the six.

“The trading pattern here is suspicious because of the build up of short positions by these entities in the Adani scrips prior to the Hindenburg report, and substantial profits earned by them by squaring off their short positions after publication of the Hindenburg report on January 24, 2023,” the expert committee said.

A detailed investigation is being carried out in respect of the trading of the six entities.

“These being matters under investigation, and the factual findings at this stage being prima facie in nature, the Committee is not delving into the details and names of these persons, or commenting upon the quality of the prima facie evidence.

“The committee wishes to ensure that the position of the respective parties, including SEBI, is not compromised either way when investigations are pending,” the report said.

Financial crime-fighting agency Enforcement Directorate (ED) “found intelligence about potentially violative and concerted selling by specific parties just ahead of the publication of the Hindenburg report, and this may lead to credible charges of concerted destabilisation of the Indian markets, and SEBI ought to be probing such actions under securities laws,” it said citing a response from ED.

The report said an analysis in trading of apples-to-port group’s flagship firm, Adani Enterprises Ltd (AEL) shares in four patches between March 1, 2020, and December 31, 2022, a month before publication of the Hindenburg report and meltdown of Adani shares, showed the state-owned LIC was the biggest loser as it sold offs 50 lakh shares of the company when prices hovered around ₹300 and bought 4.8 crore shares when the prices ranged between ₹1,031 and ₹3,859.

After a detailed scrutiny of the movement of prices of Adani shares and their sale and purchase by different entities, the committee found no evidence of price manipulation of stocks by firms linked to the Adani Group.

Trading in AEL shares was analysed in four periods — March 1, 2020, to August 31, 2020, (Patch-1), September 1, 2020, to September 30, 2020, (Patch-2), October 1, 2020, to March 31, 2021, (Patch-3) and April 1, 2021, to December 31, 2022, (Patch-4).

Stock market regulator Securities and Exchange Board of India (SEBI) informed the committee that “while the price of AEL shares rose significantly, there was no evident pattern of manipulative contribution of price rise which could be attributed to any single entity or group of concentrated entities.”

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Delhi News

Adani: 6 entities under lens for suspicious trading: SC panel on Adani crash

NEW DELHI: The Supreme Court-appointed expert committee headed by former SC judge AM Sapre emphatically declared that there was no regulatory failure on Sebi’s part during the sharp rise in share prices of Adani group companies between March 2020 and December 2022, and their dramatic meltdown after publication of the Hindenburg report this January 24.
The committee, which submitted its report to the SC, said it found no evidence to suggest that the rise in prices of Adani scrips during the period concerned had to do with unusual trading or participation in buying or selling of scrips of the group companies by 12 foreign portfolio investors (FPIs), suspected to be linked to the group which have been under investigation since October 2020 for alleged violation of 25% minimum public shareholding (MPS) norm.

However, “Sebi examined whether there has been any unusual trading pattern proximate to the release of the Hindenburg report… between January 18-31. While there was no adverse observation with respect to Adani scrips in the cash segment, suspicious trading has been observed on the part of six entities”, it said.
“These are four FPIs, which are not among the 12 FPIs suspected to be linked to Adani group and under investigation for violation of MPS norms, and one corporate body and one individual. The trading pattern (adopted by these six) is suspicious because of the build-up of short positions…in the Adani positions prior to the Hindenburg report, and substantial profits earned by them by squaring off their short positions after publication of the Hindenburg report…” it added.
LIC sold 50L AEL shares at ₹300, bought 4.8cr at ₹1,031-3,859: Panel
An analysis by the Supreme Court-appointed expert committee chaired by ex-SC judge A M Sapre of trading in Adani Enterprises (AEL) shares in four patches between March 1, 2020, and December 31, 2022, a month before publication of the Hindenburg report and meltdown of Adani shares, showed that LIC was the biggest loser as it sold off 50 lakh AEL shares when prices hovered around Rs 300 and bought 4.8 crore AEL shares when the prices ranged between Rs 1,031 and Rs 3,859.
After a detailed scrutiny of the movement of prices of Adani shares and their sale and purchase by different entities, the committee found no evidence of price manipulation of stocks by companies linked to the Adani group or others. It emphasised that LIC chose to sell group stocks when others, including big mutual funds and FPIs, were picking up large quantities of them, and that Adani-linked entities were responsible for only a minuscule part of the volume of trading.
Trading of AEL shares was analysed in four periods – Patch I: March 1, 2020 to August 31, 2020; Patch II: September 1, 2020 to September 30, 2020; Patch III: October 1, 2020 to March 31, 2021; and Patch IV: April 1, 2021 to Dec 31, 2022.

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After Expert Panel’s Clean Chit To Adani Group, Big Questions For Congress

Days before the Budget session of parliament, it was business as for the economy, the share market and politics. Everyone was gearing up for  newly elected President Droupadi Murmu’s maiden address to the joint session of parliament, and the Finance Minister’s Budget announcements. 

In came the Hindenburg report, ‘Adani Group: How the World’s 3rd Richest Man is Pulling the Largest Con in Corporate History’. The title was designed to catch eyeballs, urgent, far and wide. The Adani Group was the only infrastructure company in the top five or 10 global firms, both in terms of market capitalisation and in expanse, in a league dominated by tech.

Once it grabbed attention, the impact was calamitous. The Adani Group’s share prices went on a downward spiral. It took a toll on other companies’ shares too, and the share market took a bad hit. The political temperatures soared. The budget session was washed out by the Congress party and parties supporting it. In the Hindenburg report, they thought they had finally found an issue to target Prime Minister Narendra Modi and his government.

Four months later, just when the market was stabilizing, and the Karnataka turbulence had settled to an extent, news broke that the Supreme Court-appointed committee on the Adani-Hindenburg issue had concluded: “prima facie no regulatory failure on part of the SEBI around the allegation of price manipulation.”

The composition of committee constituted by the Supreme Court should also be noted. The committee was led by former Supreme Court Justice AM Sapre, with former SBI Chairman OP Bhatt, former Bombay High Court Judge Justice JP Devadhar, reputed banker KV Kamath, infosys co-founder Nandan Nilekani and senior lawyer Somasekhar Sundaresan. It was the demand of some of the petitioners. It is worth noting that Chief Justice DY Chandrachud had refused to accept the Centre’s suggestion on the constitution of the committee. The Chief Justice had then said “We don’t want sealed cover suggestions. Even if we don’t accept your suggestions, the other side will have the impression that we accepted the government-adopted committee. I want to have complete transparency. We will appoint our own committee and a sense of trust should be there.”

The competence, independence and impartiality of the expert committee was thus beyond any doubt. The most important findings are – short selling on Adani stocks and undue profiting by some entities; No price manipulation by Adani Group Found; empirical data shows the retail investment exposure to Adani stocks has increased multifold after January 24; The report has also very clearly mentioned that the mitigating measures taken by the Adani Group has helped in building confidence in the stock and the stocks are stable now. 

The committee findings make it abundantly clear that the Hindenburg report was motivated mischief to make money and create a political upheaval in the Indian polity and economy. This is further substantiated by Hindenburg’s stated position that it was a shortseller group and there was nothing illegal in making money via short selling.

Second, much to the dismay of the Congress party, which had been gunning for Prime Minister Narendra Modi and his government on the issue, George Soros, a Hungarian-born American billionaire and a known Modi baiter, said, “In India, Modi and business tycoon Adani are close allies. Their fate is intertwined. Adani Enterprises tried to raise funds in the stock market but failed…Modi will have to answer on Adani in parliament. This will significantly weaken Modi’s stranglehold on India’s federal govt. I expect a democratic revival in India”.

It is open to public wisdom snd the kind of democratic revival Soros saw, when he more than once openly praised the Congress-led UPA government at was in power.

What Soros said and the publicly stated position of Hindenburg (or vice-versa) is corroborated by the preliminary findings of SEBI and the Enforcement Directorate that there was unusual short selling activity around Adani shares a few days before he Hindenburg report with the intention of making money.

This was not the first time that a foreign media report emerged ahead of a parliament session or election and was immediately picked up by sections of the media and opposition parties to target the Modi government and create doubts in the people’s mind. It has happened, most prominently in case of Pegasus and Rafale. In both the cases, the matter ended after the Supreme Court pronounced a verdict. Remember Rahul Gandhi in 2019 had had tried to make an election issue out of the Rafale deal but ended up offering a written unconditional apology to the Supreme Court.

Now the questions which the protagonists of the Hindenburg report, lobbyists and the Congress party leadership will perhaps need to answer are:

– Did they not intentionally cause the loss of small investors’ money? Not only did the Adani share prices drop, the stock market as a whole went down.

– Why did they not listen to the clarifications given by the SBI, LIC, RBI and others that no wrongdoing was done and public money was safe? They banked on the  allegations of a foreign short seller rather than their own banks, investigative and regulatory agencies.

– Why was entire Budget session of parliament washed out, leading to a wastage of time and public money?

– Why did they persist in making noises even after the Mauritian finance minister strongly rebutted allegations of shell companies in parliament?

– Why did they continue making wild charges even after Chief Justice DY Chandrachud cautioned the lawyer of a petitioner to stop using the phrase “there was a regulatory failure…you cannot stand here and say that there was regulatory failure…because whatever you say here affects stock markets…let us be responsible…easy to stand and make allegations.”

– Why did the Congress and some of its allies insist on a Joint Parliamentary Committee probe when the Supreme Court-appointed committee constituted by it was seized of the matter?

– Is it not a fact that the Congress while protesting in parliament along with other opposition parties had with banners and placards demanded a probe by a Supreme Court committee or a JPC?

– Did it not insist on a JPC even as the likes of Sharad Pawar, Mamata Banerjee, Jagan Mohan Reddy and KCR were satisfied after the constitution of a committee to probe the issue, only to keep the political pot boiling?

– Did this entire group and parties not have faith in the Supreme Court?

– How come some foreign banks which were hyper active after the Hindenburg report went bankrupt and the Indian banks against whom allegations were made remained strong amidst the shake-up of western banks?

On a broader level, it is an issue of right or wrong. Is doing big business and going global with the same business wrong? Or, doesn’t “dream big, think big”  rightly signify an aspirational New India, which wants to be at the head table of developed nations in the world? No one is condoning wrongful business practices in violation of the law of the land, but the fate of millions of ordinary investors and workers must not be allowed to suffer because someone sitting abroad in some fancy office has decided to make money at their cost or has some whimsical desire to decide how a nation must run and who should run it. 

(Sanjay Singh is a senior journalist based in Delhi)

Disclaimer: These are the personal opinions of the author.

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FinMin stands by 2021 Parl reply that Sebi was investigating Adani Group

As a political row erupted over SEBI telling Supreme Court that it has not been probing the Adani group since 2016, the Finance Ministry on Monday said it stands by its July 2021 written reply in Parliament that had stated that the stock market regulator was investigating some Adani group companies.

After SEBI filed a fresh affidavit with the Supreme Court to strengthen its case for a six-month extension of the deadline to complete the probing allegations of fraud and money laundering against Adani Group, Congress and other opposition parties cited the finance ministry’s July 2021 replies in Parliament to ask who was misleading.

“The government stands by its reply in Lok Sabha on 19th July 2021 to Q. No. 72, which was based on due diligence and inputs from all concerned agencies,” the Finance Ministry tweeted.

This was in response to Congress spokesperson Jairman Ramesh posting a screenshot of the written reply made by Minister of State for Finance Pankaj Chaudhary on July 19, 2021.

In the reply, the Minister stated that “SEBI is investigating some Adani Group companies with regard to compliance with SEBI regulations. Further, the Directorate of Revenue Intelligence (DRI) is investigating certain entities belonging to the Adani Group of companies under laws administered by it.

He had gone on to state that Enforcement Directorate was not carrying out any investigation and that “SEBI had vide order dated January 16, 2016, directed depositories to freeze particular beneficiary accounts of certain foreign portfolio investors including Albula Investment Funds, Cresta Funds Ltd and APMS Investment Ltd.

The damning January 24 report of US short seller Hindenburg had alleged that some of these funds based out of Cyprus and Mauritius were proxies of Adani’s that were used to manipulate stock markets and funnel money.

Adani Group has denied all allegations.

On petitions seeking probe into the allegations, the Supreme Court had asked SEBI to wind up its probe against the Adani Group in two months. That deadline ended earlier this month and SEBI sought six more months to complete the probe.

Petitioners however contested that SEBI had been probing Adani group since 2016 and shouldn’t be given a six-month extension.

In rejoinder to the petitioners, SEBI in a fresh affidavit on Monday said that the allegations that it “is investigating Adani since 2016 is factually baseless”.

SEBI however did not say since when it was probing the Adani group.

“Now SEBI tells the Supreme Court that they have not been investigating any of the serious allegations against Adani! Which is worsemisleading Parliament, or being fast asleep as lakhs of investors are duped by alleged money laundering and round-tripping using offshore shell companies? Or even worse, was there a restraining hand from above?” Ramesh tweeted.

Priyanka Chaturvedi, Rajya Sabha MP from Shiv Sena-UBT, tweeted: “So, SEBI denies any investigation into Adani companies since 2016, denies its own statement to the court? Was the junior finance minister lying to the country regarding the investigation in his answer on 19 July 2021? This smells of a cover-up but at whose behest?

“If what SEBI saying to the court is correct, goes to prove that Adani Group has almost been given a free rein to manipulate markets through offshore companies since 2014 and with the regulatory body turning a blind eye to the illegalities. What a shame, again I repeat, only a JPC can uncover the extent of damage. Also the exposure of banks, LIC, EPFO in the group. Public loss for private gain, at whose behest?” she asked.

She even raised doubts at SEBI using a junior employee to file the affidavit.

“Wow. A 22-year-old has been hired by @SEBI_India to file an affidavit in the Supreme Court on their behalf! Must be either super experienced from kindergarten days to file such replies or naive enough to be part of something as big as this,” she said in another tweet.

The SEBI affidavit was filed by one Satyanshu Maurya, who said he was presently working as an Assistant Manager in the Securities and Exchange Board of India (SEBI).

TMC leader and MP Mahua Moitra, who has been leading the tirade against the Adani group and who had put the July 19, 2021 questions, hasn’t yet commented on the issue.

She had however last week warned of Adani being allowed to raise funds through share sale before a probe is completed.

“Let me tell @Sebi_india loud & clear that we will raise Cain if Adani allowed to raise even a rupee of equity without investigation being completed,” she had tweeted on May 12 with ‘#FraudstersBeware’ hashtag.

On May 12, lawyer Prashant Bhushan opposed the plea for the extension of time, saying SEBI was seized of some kind of investigation in the matter since 2016.

SEBI in the fresh affidavit said that the application for extension of time is meant to ensure “carriage of justice keeping in mind the interest of investors and the securities market” since any incorrect or premature conclusion of the case arrived at without full facts material on record would not serve the ends of justice and hence would be legally untenable.

It said the ‘investigation’ referred to in its earlier reply affidavit has no relation and/or connection to the issues referred to and/or arising out of the Hindenburg report.

“The matter referred to in paragraph 5 pertains to the issuance of Global Depository Receipts (GDRs) by 51 Indian listed companies in respect of which investigation was conducted. However, no listed company of the Adani group was part of the aforesaid 51 companies. Pursuant to the completion of the investigation, appropriate actions were taken in this matter.”

It termed as factually baseless the allegation that the SEBI has been investigating the Adani group since 2016 and said, I, therefore, say and submit that reliance sought to be placed on the investigation pertaining to GDRs is wholly misplaced.

Chaudhary in the July 19, 2021 reply to the Lok Sabha also mentioned of the GDRs.

“In a matter pertaining to issuances of Global Depository Receipts (GDR) by certain Indian companies, SEBI vide order dated June 16, 2016, had directed depositories to freeze particular beneficiary accounts of certain FPIs including Albula Investment Ld, Cresta Funds Ltd and APMS Investment Fund Ltd. However, no order in respect of other beneficiary accounts of these three FPIs has been passed by SEBI,” he had said.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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Petitioner opposes six-month extension to Sebi

Advocate Vishal Tiwari, one of the petitioners in the Adani-Hindenburg case in the Supreme Court, has filed an application opposing the six-month extension sought by the Securities and Exchange Board of India (Sebi) to complete the probe into the allegations in the Hindenburg Research report.
Sebi, which was set to file a status report in the matter on May 2, asked the top court to give it six more months to complete its probe into short-seller Hindenburg Research’s allegations against Adani. Tiwari’s application says Sebi is trying to make the probe “endless” and prayed that the court should not grant the regulator the extension.
The Supreme Court, on March 2, formed an expert committee of five members headed by a former judge to investigate the regulatory failure, if any, that led to investors losing crores after the report by American short-seller Hindenburg Research against the Adani Group of companies was published.
The committee was directed to submit its report in a sealed cover before this court within two months. The court had also said besides the ongoing investigation by Sebi into allegations in the Hindenburg Research Report against the Adani group of companies, the regulator shall also probe whether there has been a violation of Rule 19A of the Securities Contracts (Regulation) Rules 1957; whether there has been a failure to disclose transactions with related parties and other relevant information which concerns related parties to Sebi; and whether there was any manipulation of stock prices in contravention of existing laws.
Sebi was also supposed to submit its report in two months and assist the expert panel formed by the court.
The Hindenburg report on January 24 alleged that the Adani Group of companies manipulated its share prices, failed to disclose transactions with related parties and other relevant information concerning related parties, in contravention of the regulations framed by Sebi; and violated other provisions of securities laws.
After the report, two separate petitions were filed by advocates M L Sharma and Vishal Tiwari. Sharma’s plea seeks the prosecution of Nathan Anderson of Hindenburg Research and his associates in India and the US for allegedly exploiting investors and the “artificial crashing” of the Adani group’s stocks.
Meanwhile, Advocate Vishal Tiwari’s plea sought the court’s directions to set up a special committee to oversee a policy for sanctioning loans of more than Rs 500 crore given to big corporations.
The third petitioner in the case was Congress leader Jaya Thakur. The plea seeks a probe against Life Insurance Corporation (LIC) and State Bank of India (SBI) for allegedly investing in the Adani Enterprises FPO (follow on public offer) at Rs 3,200 per share when the price was Rs 1,800 per share in the secondary market.
The fourth petition was filed by one Anamika Jaiswal, represented by senior advocate Prashant Bhushan.

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LIC ups stakes in 4 Adani companies

MUMBAI: Amid heavy selling in all 10 Adani Group stocks since January-end, life insurance major LIC marginally increased its holdings in at least four companies of the airports-to-FMCG conglomerate, quarterly shareholding disclosures by companies showed.
The shareholding of Adani companies, as of March 31, also showed that retail investors increased their stakes in most stocks while mutual funds cut their exposure. For foreign investors, it was a mixed bag.
In the March quarter, LIC increased its holding in Adani Green Energy, Adani Total Gas, Adani Transmission and Adani Enterprises, kept its exposure unchanged in ACC, while reduced its stake in Adani Ports and Ambuja Cements.
Shareholding disclosures by the three remaining companies within the group – Adani Power, Adani Wilmar and NDTV – did not show any holding by LIC. This could either be because the life insurance major holds less than 1% in each of these companies or doesn’t own any shares. Listing rules specify that the names of only those shareholders that hold 1% or more in a company have to be disclosed to exchanges.
The latest shareholding patterns of Adani companies also showed that in group flagship Adani Enterprises, retail shareholders increased their stake by more than a percentage point to 7.9%, while mutual funds cut their stake in the company to 0.9% from 1.2%. Foreign funds too increased their stake in the company to 17.8% from 15.4% but this was largely because on March 2, the promoters sold nearly 4% in the company to GQG Partners, a US-based entity registered here as a foreign portfolio investor.
In three other companies too – Adani Ports, Adani Green Energy and Adani Transnission – the promoters had sold some minor part of their stakes to GQG Partners. Consequently, promoter holdings in these companies have also come down during the last quarter.

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Why JPCs Are An Exercise In Futility

The Life Insurance Corporation of India (LIC), a state-owned company, has reportedly lost over Rs 20,000 crore of investment value out of the total holding of Rs 36,000 crore (equity and debt) in Adani companies. That is, for every Rs 10 invested, almost Rs 6 has been lost. State Bank of India, a public sector bank, has an outstanding exposure worth Rs 27,000 crore to the same group.

Both LIC and SBI have built their credibility over decades. They are custodians of the savings of crores of poor and middle-class citizens. It is these savings that are at risk today.

All opposition parties were unanimous that an inquiry needed to be done. The only difference of opinion was on the mode of investigation. Last month in parliament, polar opposites like the communists and the All India Trinamool Congress (TMC) were demanding a (time-bound) Supreme Court-monitored investigation. Other opposition parties wanted the inquiry to take the form of a Joint Parliamentary Committee (JPC). On March 2, the Supreme Court gave its judgment.

The Left parties and the TMC being on the same page is the rarest of rare occurrences. A Lady Gaga-Pankaj Udhas duet is more likely. But there are times when parties with divergent political ideologies come together on a major issue. I can share another example. In 2016, days after demonetisation, Mamata Banerjee led her MPs on a march from Parliament House to Rashtrapati Bhavan. The BJP’s old and trusted ally Shiv Sena, then still very much part of the NDA, were the unlikely participants at that important protest.

A Supreme Court-monitored investigation is what the CPI(M), CPI and TMC have been demanding on the floor of parliament. It is not the 10/10 solution, but it will be far more effective than a JPC. But before I spell out why JPCs are pointless, let me flag the alternate view that suggests the Supreme Court should not have intervened, as this is beyond its remit. This school of thought believes that any market-related issue should be investigated by the Securities and Exchange Board of India (SEBI). Since SEBI was in slumber and did not even follow the tenets of its own preamble, which gives it considerable authority, the Supreme Court-monitored probe was an option worth opting for. Veteran business journalist Sucheta Dalal, though, is still cynical: “Is there a parallel anywhere in the world where corporate honchos/lawyers with deep connections to the business community are appointed to what is supposed to be an investigation exercise?”

Here are three reasons why JPCs are an exercise in futility.

One, the chairperson of the JPC is decided by the Speaker of Lok Sabha and the chairperson of Rajya Sabha, in consultation with each other as may be necessary, and its members are subsequently nominated by each party according to the party’s strength. This makes these committees skewed towards the ruling majority because of their numbers in the Houses. The chairperson of the JPC would have been a BJP MP.

Second, in almost every JPC there is no consensus on the final report. Whenever important amendments are proposed by an opposition MP, the amendments are defeated in the committee by a show of hands. The ruling party uses its brute majority to do this. This has become a trend. Instead of coming to these meetings with an open mind, Members of Parliament representing the treasury benches come and rubber stamp the views of the ruling party. Those in the opposition, holding an alternate view, are outvoted. The only recourse left is to table a dissenting note – for the record.

Third, let me pluck out a few examples – from 1987, 1992 and 2001. In the Bofors case of 1987, it was alleged that a Congress member had taken bribes while settling the deal of purchasing the Bofors ‘shoot and scoot’ guns. The JPC report was boycotted by the opposition highlighting that the committee was packed with members of the ruling party. When the Harshad Mehta scam (1992) surfaced, a JPC was set up to inquire into allegations that Mehta diverted funds to Maruti Udyog Limited and provoked a major fall in the Sensex. However, the recommendations were neither accepted nor implemented. During the Share Market Scam (2001), the Ahmedabad-based Madhavpura Mercantile Cooperative Bank had big exposure to the stock market, courtesy former stockbroker Ketan Parekh. The JPC suggested stock market regulations, which were subsequently diluted.

There have been other cases where a JPC has been formed for investigations. For example, the Joint Committee on pesticide residues in and safety standards for soft drinks, fruit juice and other beverages (2003) and the Joint Committee to examine matters relating to allocation and pricing of telecom licences and spectrum (2011). While only some recommendations were implemented from the former, the latter was mired in controversy.

A time-bound investigation conducted under the supervision of the Supreme Court must get to the bottom of the truth. India is watching. The world is watching.

Derek O’Brien, MP, leads the Trinamool Congress in the Rajya Sabha)

Additional research: Chahat Mangtani 

Disclaimer: These are the personal opinions of the author.

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Adani Group stocks have best day since February 8

MUMBAI: After plummeting almost unabated for more than a month, eight of 10 Adani Group shares made a strong recovery on Tuesday with the flagship Adani Enterprises rallying over 14%. Only two stocks – Adani Total Gas and Adani Transmission – closed lower, locked at the 5% circuit, BSE data showed.
The day’s rally added a little over Rs 30,000 crore to the group’s combined market capitalisation, or about 4.4%, its best day in terms of addition to its market value since February 8, BSE data collated by TOI showed. At the close of trade, the group’s total market cap was Rs 7.1 lakh crore.
All the 10 stocks within the Gujarat-headquartered ports-to-FMCG conglomerate have been losing their value since January 25, a day after US-based short-seller Hindenburg Research published a detailed report alleging stock manipulation, accounting fraud and corporate malfeasance by the group. Although Adani Group denied all allegations in the report, the hammering of its stocks on the bourses has been nearly relentless ever since. On a point-to-point basis, the total loss in market value has been Rs 12.1 lakh crore, translating into about $146 billion.
The gain in Adani stock prices came a day after the group’s top officials made presentations to a host of global investors in Hong Kong. The group is scheduled to meet institutional investors from across the globe over three days ending Wednesday, trying to assuage them that the allegations made by Hindenburg were incorrect and will not have any impact on its business.
LIC reverses slide, up 2%
The stock price of life insurance major LIC that was under pressure for its exposure to Adani Group’s stocks, on Tuesday closed 1.9% higher as most of the stocks from the Gujarat-based conglomerate rallied despite a weak market. On Monday, LIC had touched an all-time low level at Rs 566. On Tuesday it closed at Rs 578.

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Adani Group: Adani stocks with higher price to earning ratios see steeper fall | India Business News

MUMBAI: Adani Group stocks have been falling relentlessly since the damning report by Hindenburg was published on January 24. Over Rs 12 lakh crore in terms of market capitalisation of the Adani scrips has been wiped out, but not all group stocks have fallen in sync. This is where the valuation of individual stocks comes into play. The deep plunge has been possible due to sky-high valuations.
The Adani Total Gas stock has crashed nearly 81% since January 24, while Adani Ports has dived 27% in the same period — the fall is in sync with how overvalued they were. Adani Total Gas stock was trading at a multiple of 844 times its earnings on January 24, a number that not even the best disruptive technology company can boast of, while Adani Ports was at 30 times, according to price-to-earnings (PE) ratios sourced from Refinitiv database. Stocks that had relatively lower valuations have fallen less. ACC, which had a PE ratio of 54, has fallen the least (26%) among the 10 Adani Group stocks, followed by Adani Ports (27%) and Ambuja Cements (31%).

A company’s PE ratio is one of the indicators of how undervalued or overpriced a scrip is in relation to its profit. Technology and consumer brands, apart from other high-growth companies, usually command steeper valuations than infrastructure or state-owned companies. For instance, TCS has a PE ratio of 31, but Tata Steel has 5. Indraprastha Gas has a PE ratio of 18, while Mahanagar Gas has 13 — both these are in the same business as Adani Total Gas.
A stock price indicates the market’s perception. But when there is a meteoric rise in a particular share, as was seen in the case of Adani scrips amid the pandemic, alarm bells start to ring. In May 2021, ET reported that CLSA had dropped coverage on Adani Transmission with the foreign brokerage saying that the stock is driven by speculative interest, keeping valuation at a stratospheric 16 times premium to the sector. That month, Adani Transmission had a PE ratio of 114, which had more than doubled to 351 by January 24 this year. Currently, it is at 73. The May 2021 ET report was quoted by Hindenburg Research in its study.
In November 2022, V K Vijayakumar, chief investment strategist at Geojit Financial Services, had alluded to ‘stratospheric’ valuations too. “A major disconnect between profits and market cap can be seen in the case of Adani stocks. Gautam Adani has proven expertise in executing large infrastructure projects, but the stratospheric valuations of Adani stocks are a matter of concern,” he had said in a report. When contacted, a representative of Geojit Financial Services said the firm doesn’t track Adani Group.
Interestingly, Adani companies may not be a steal deal even after the selloff. Adani Total Gas, which is stuck in a rut of hitting lower circuits since the report, is still available at 156 times its earnings. “Stock-specific actions will continue in Adani Group,” Kranthi Bathini, director (equity strategy) at WealthMills Securities, said.

Hindenburg’s predictions about Adani stocks come true? Group’s net worth dips below $44 billion

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