India’s Supreme Court orders probe into Adani allegations

The Supreme Court of India has set up an independent panel to investigate if there is any regulatory failure related to the allegations against Adani Groupafter a bombshell report from US short sellers.

The country’s top court ordered a six-member panel to investigate “regulatory failure to address alleged violations of the law in the securities market related to the Adani Group,” the court said on Thursday.

The committee will also provide “an overall assessment of the situation including relevant causal factors that have led to volatility in the securities market in recent months,” added the order of the court.

In addition, the panel will recommend measures to strengthen the regulatory framework and “secure compliance with existing frameworks to protect investors.”

The Indian Supreme Court action comes a little over a month after Hindenburg Research released a lengthy report on January 24, accusing the Adani Group of stock manipulation and fraud. In a rebuttal that runs to more than 400 pages, the group denies wrongdoing.

The debacle led to a massive selloff in the Group’s shares and has wiped out approximately $140 billion in market value from the seven largest listed companies in the conglomerate.

The panel will be chaired by Judge Sapre, a retired Supreme Court judge. Other committee members include OP Bhatt, KV Kamath, Nandan Nilekani and Somsekhar Sundaresan and retired Justice JP Devdhar.

The Supreme Court also directed the country’s market regulator, the Securities and Exchange Board of India, to investigate “whether there is any manipulation of stock prices in violation of existing laws,” the court order said.

“SEBI will expeditiously complete its investigation within two months and submit a status report,” he added.

India’s top court said the directive was prompted by “the loss of investor wealth in the securities market over the past few weeks due to the decline in share prices of Adani Group companies,” and was necessary to protect Indian investors from the market. volatility.

The petition includes a request to look into the issue of “public money” which is “at risk as public institutions like State Bank of India and Life Insurance Company of India are exposed to the Adani Group,” the court order said.

Both institutions told CNBC recently that their exposure to the Adani Group could be adjusted.

In a recent blog, Aswath Damodaran, a professor of finance at New York University’s Stern School of Business, said the Adani Group has exploited the “weakest link” in Indian institutions to its advantage. He also said that the Adani affair provided an opportunity for Indian institutions to learn lessons and try to fix the problem.

“As for the participating institutions, including banks, regulatory authorities and [Life Insurance Corporation]I have learned not to attribute venality or corruption that can be attributed to inertia and indifference,” said the economist in his blog.

“The wider version of the Adani story is that a family group has exploited the weakest layers and links in the Indian story, to their advantage,” he said, adding that “there is a lesson for the nation as a whole, as it turns out, to what we hope will be a decade.” growth.”

Billionaire founder Gautam Adani, whose family owns a port-to-energy conglomerate, said he welcomed the Supreme Court’s order.

“The Adani Group welcomes the order of the Supreme Court,” Adani wrote on Twitter on Thursday. “This will bring finality to the time bound. Truth will prevail.”

The mogul’s rapid fall has prompted renewed scrutiny of his relationship with Indian Prime Minister Narendra Modi.

Last month, billionaire investor George Soros said the Adani unrest would undermine Modi’s power and lead to a “democratic renaissance” in the country.

Soros’ criticism, in particular, focused on the cozy relationship between Modi and Adani. Both of them hail from the state of Gujarat in India. Adani was an early supporter of Modi’s political aspirations and a champion of the Indian leader’s growth vision for the country.

“Modi and business tycoon Adani are close allies; their fates are intertwined. Adani Enterprises tried to raise funds on the stock market, but they failed,” said Soros.

“Adani was accused of stock manipulation and its stock collapsed like a house of cards. Modi is silent on the matter, but he has to answer questions from foreign investors and in parliament,” the investor added.