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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 favor 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.”
The rally in the stocks of Adani’s 10 listed firms added $7.5 billion, pushing the group’s market value to $181.5 billion — the highest level since Jan. 27 last year, according to calculations by Bloomberg. The combined market capitalization is still more than $50 billion short of the pre-Hindenburg level.
The ruling from India’s apex court comes after nearly a year of intense scrutiny for the ports-to-power conglomerate, which had repeatedly denied Hindenburg Research’s allegations of stock price manipulation and related party transactions among other charges in a bombshell report.
The short-seller’s broadside last January triggered a massive rout in Adani stocks and bonds, wiping out more than $150 billion in equity market value at one point.
It also catalyzed other damaging investigations, like one in August from the Organized Crime and Corruption Reporting Project which identified 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 also rejected these allegations.
The group spent much of 2023 in damage control, which included paying down debts, assuaging investor concerns through road shows across the world’s financial hubs, and scaling back its non-core businesses.
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 wrap up its investigation in three months marks a further extension after the regulator failed to meet the court-mandated deadline twice.
Sebi, which has struggled to get data from overseas agencies, told the Supreme Court in August that it had closed its probe in 22 out of 24 issues concerning the Adani Group. It is still looking into alleged violations of minimum public shareholding rules and trading activity in Adani stocks before and after the Hindenburg report.
“From a legal and political perspective, it is positive for the group” though final findings are still awaited, said Shriram Subramanian, founder of InGovern Research Services, about the court ruling. The conglomerate “needs to go further on corporate governance to attract a wider set of investors.”
Even before the Supreme Court’s verdict, the Adani Group had been steadily regaining investor and lender confidence. The conglomerate has secured investments from GQG Partners Inc. and Middle-Eastern sovereign wealth funds, funding from a US government agency, refinanced a $3.5 billion loan and pledged $100 billion in green energy investment.
“I don’t think anybody is worried about Hindenburg anymore,” Abhay Agarwal, founder and portfolio manager at Piper Serica Advisors, said. “Investors’ focus is now on earnings and valuations of individual companies.”
(By Shruti Mahajan and P R Sanjai)
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