Saturday 02 Mar 2024
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(Jan 3): India’s Supreme Court ordered the country’s markets regulator to conclude its investigation into the Adani Group within three months and said no more probes were needed, in a reprieve for the billionaire who cheered the verdict as the “truth” prevailing.

The three-judge bench on Wednesday also urged the federal government to implement an expert panel’s recommendations to bolster the regulatory framework. But it didn’t go further, drawing a line, at least domestically, under the year-long saga triggered by a US short-seller which alleged widespread corporate malfeasance by Gautam Adani’s conglomerate.

The verdict “is in favour of Adani Group prima facie,” said Kranthi Bathini, equity strategist at WealthMills Securities Pvt in Mumbai. While clarity is needed on pending probes from Securities and Exchange Board of India, or Sebi, he said the court had reiterated that scathing external reports against the Adani Group were “not triggers for an external investigation.” 

Flagship Adani Enterprises Ltd’s stock rose 9.1% before the verdict was out to touch its highest level in more than 11 months.

Shares of 10 listed Adani Group firms were trading higher in Mumbai following the verdict. Flagship Adani Enterprises Ltd’s stock rose 9.1% before the verdict was out to touch its highest level in more than 11 months.

Intense scrutiny

The ruling from India’s apex court comes after nearly a year of intense scrutiny for, whose ports-to-power conglomerate repeatedly denied Hindenburg Research’s allegations of corporate malfeasance, stock price manipulations and related party transactions among others in a bombshell report.

In August, Organised Crime and Corruption Reporting Project published a report identifying potentially controversial shareowners of Adani companies that had longtime business ties to the founders and had spent years trading hundreds of millions of dollars’ worth of Adani Group stocks. The conglomerate had rejected these allegations.

The short-seller’s broadside last January triggered a massive rout in Adani stocks and bonds, wiping out more than US$150 billion (RM688.88 billion) in equity market value at one point. 

It also forced the Indian conglomerate into months of damage control that included paying down debts, assuaging investor concerns through road shows across the world’s financial hubs and scaling back non-essential businesses.

Months-long probe

India’s top court in March ordered Sebi to probe Hindenburg’s allegations and submit the findings within two months. It also set up a six-member expert panel to assess if there were any regulatory lapses. The panel said in May no regulatory failures could be concluded nor was there any conclusive evidence of stock-price manipulation by the conglomerate.

The verdict on Wednesday asking Sebi to expedite pending investigations marks yet another extension for the regulator to wrap up its months-long probe after failing to meet the court-mandated deadline twice. 

Sebi, which has struggled to get data from overseas agencies, told the top court in August that it had closed probe in 22 out of 24 issues concerning the Adani Group. It was still looking into alleged violations of minimum public shareholding rules and trading activity in Adani stocks before and after the Hindenburg report. 

‘Final findings’

“From a legal and political perspective, it is positive for the group” but the final findings are still awaited, said Shriram Subramanian, founder of InGovern Research Services, said about the court ruling. The conglomerate “needs to go further on corporate governance to attract a wider set of investors.”

Even thought Sebi’s unfinished probe remains an regulatory overhang, the Adani Group has been steadily regaining investor and lender confidence in recent months. The conglomerate has secured investments from GQG Partners Inc and Middle-Eastern sovereign wealth funds, funding from a US government agency, refinanced a US$3.5 billion loan and pledged US$100 billion in green transition.

“I don’t think anybody is worried about Hindenburg anymore,” Abhay Agarwal, founder and portfolio manager at Piper Serica Advisors, said over phone. “Investors’ focus is now on earnings and valuations of individual companies.”

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