NEW DELHI: The Justice Abhay Manohar Sapre committee, appointed by the Supreme Court to look into Adani-Hindenburg issues, has found neither any regulatory failure in relation to compliance with the regulatory stipulations governing minimum public shareholding stipulation, nor any conclusive proof of price manipulations in Adani scrips.

It said the allegations in the Hindenburg report, published on January 24, this year are substantially based on publicly available information.

"The manner in which the report has extrapolated the information and presented it, has led to a serious nose-dive in the prices of Adani stocks. The prices have undergone a correction and have improved but not to the level as existing prior to January 24, 2023, the date of publication of the Hindenburg Report," it noted.

It said, “Hindenburg report contained no new data but was substantially a collection of inferences from data in the public domain”.

The report, submitted in the Supreme Court, said, the committee is of the view that it would not be possible to return a finding of a regulatory failure in relation to compliance with the regulatory stipulations governing minimum public shareholding stipulation.

It said the Foreign portfolio investors (FPIs) in question have made declarations of the beneficial owner by identifying the natural persons controlling their decisions for purposes of the Prevention of Money Laundering Act (PMLA) and this is the declaration that comports to compliance with the FPI Regulations.

“SEBI has been investigating the ownership of the 13 overseas entities since October 2020,” it noted.

Taking into account explanations provided by SEBI supported by empirical data, prima facie, it would not be possible for the committee to conclude there has been a regulatory failure around the allegation of price, it said.

The committee said SEBI has also found that some entities have taken short positions prior to the publication of the Hindenburg report and have profited from squaring off their positions after the price crashed upon publication of the report.

It noted that while the price of shares of Adani Enterprises Ltd (AEL) rose, no evident pattern of manipulative contribution to price rise could be attributed to any single entity or group of connected entities. The committee said it is apparent that SEBI was actively engaged with developments and price movements in the market.

“It would not be possible to return a finding of regulatory failure…..since SEBI has an active and working surveillance framework to take notice of high price and volume movements and has applied itself to the data generated by such surveillance, applying objective criteria, to consider if the integrity of the natural price discovery process has been manipulated,” the committee said.

The report said in the case of the Adani stocks, 849 alerts were generated by the system, and were considered by stock exchanges resulting in four reports to SEBI two well prior to the Hindenburg Report and two after January 24, 2023.

“In all the four reports, the stock exchanges considered the factors and prima facie, found no evidence of any artificiality to the price rise and did not find material to attribute the rise to any single entity or group of connected entities,” the report said.  

The committee said SEBI has explained the analysis done, taking the example of Adani Enterprises Ltd, breaking the trading data into four "patches" (periods of time) where the stock price rose significantly.

The committee said in a nutshell, no pattern of artificial trading or "wash trades" among the same parties’ multiple times was found. “In one of the patches where the price rose, the FPIS under investigation were net sellers. One investing entity that had purchased across the patches had purchased far more of other securities. In a nutshell, there was no coherent pattern of abusive trading that has come to light”, it said.

On March 2 this year, the court constituted the expert committee headed by Justice Abhay Manohar Sapre, a former judge of the Supreme Court, and comprising, O P Bhatt, Justice (retired) J P Devadhar, K V Kamath, Nandan Nilekani, and advocate Somashekhar Sundaresan.

It also pointed out SEBI has found 42 contributories to the assets under the management of the 13 overseas entities and has been pursuing various avenues to ascertain the same.

“It has been a long-standing suspicion of SEBI that some of the public shareholders are not truly public shareholders and could be fronts for the promoters of these companies,” it said.

Despite pursuing various routes through the Enforcement Directorate and the income-tax department, SEBI has not determined the ultimate ownership of these 13 entities.

[Read Expert Committee Report]