The Securities and Exchange Board of India (Sebi) has a limited role in the ongoing Adani Group issue that has snowballed into a political one as well with parliamentarians demanding a regulatory probe into the allegations raised by Hindenburg Research.
The capital markets regulator can investigate the issues raised by Hindenburg to check if the relevant disclosures have been made by Adani Group entities.
“Sebi has a very limited role in this. Sebi’s role will only come if it finds that certain disclosures have not been made by the company as required by the regulations,” says J N Gupta, Founder, Stakeholder Empowerment Services, a proxy advisory firm.
“In this particular case, if there is anything in the Hindenburg report, which is not in public domain and which Adani should have disclosed and has not disclosed, then action should be taken in accordance with the regulatory framework,” says J N Gupta, a former executive director of Sebi.
More importantly, if it is found that the conglomerate failed to make a disclosure related to any material development, then the regulator can initiate a formal probe by issuing a showcase notice.
Incidentally, all listed entities are bound by the listing regulations and those related to disclosures as any development or update they can have a material effect on the stock price has to be promptly disclosed as part of stock exchange announcements.
While the market has been abuzz with talks of higher surveillance on the Adani Group stocks, that’s a default action initiated by the regulatory agency whenever there is enhanced volatility or news flow around any stock.
Adani group stocks have been under heavy selling pressure ever since the scathing report by Hindenburg Research has come out in the open. The impact has been such that Adani Enterprises had to call off its follow-on public offer (FPO) even after it was fully subscribed.
The correction in the shares of Adani Enterprises has been such that the stock is currently trading at Rs 1.564.70, which is nearly half of the FPO price band that was fixed between Rs 3,112 and Rs 3,276.
Interestingly, Gupta believes that Sebi could also look into how short positions were created in the Indian market and whether those were created within the regulatory framework or outside of it.
“If it is outside that means there exists some regulatory vacuum which needs to be plugged since today it is Adani but tomorrow it could be any other group as well,” says Gupta.