Sebi board likely to take up Adani stock rout at its meet this week

Union Finance Minister Nirmala Sitharaman’s customary post-Budget meeting with the Securities and Exchange Board of India (Sebi) — on February 15 — is likely to touch upon the recent rout in shares of the Adani group, said two people in the know. The minister will address Sebi’s board on the same day.

Sebi’s board is also likely to apprise the minister of the regulatory framework, its surveillance mechanism, and whether the mechanism is robust enough to tackle market manipulation.

“The norms relating to foreign money coming to India by using offshore tax havens and safeguards for investor protection could also be deliberated upon,” said a regulatory official. An email sent to Sebi did not elicit a response.

The discussion assumes significance following the Supreme Court suggestion on creating a robust mechanism to regulate the stock market.

The court on Friday asked Sebi to respond on Monday on measures that could be taken to protect investors from instances like the slump in Adani group stocks after a critical report by American short-seller Hindenburg Research.

The court was hearing PIL (public interest litigation) petitions alleging the exploitation of investors.

The court has sought inputs from the finance ministry and others on various issues, including making the regulatory mechanism strong.

The finance minister told reporters after her customary post-Budget address to the Reserve Bank of India’s board on Saturday: “I will not disclose here what the government will be saying in the court ... India’s regulators are very, very experienced and they are experts in their domain. The regulators are seized of this matter and they are on their toes as always, not just now.”

Sources said the government might provide details of inflows of foreign money into the stock markets and challenges with respect to knowing the beneficial owners if they routed money through shell companies set up in unknown jurisdictions. Finance ministry officials, however, do not see any major impact on at least public financial institutions such as Life Insurance Corporation (LIC) or State Bank of India due to the rout.

“They are at a strong position and their exposure to one private company would not create any issues for them,” a senior government official said.

Besides, an institution like LIC is a diversified long-term investor in the market, and has investments in many firms, and hence its shareholders should not be worried, the official said. The value of Adani group stocks plummeted after Hindenburg Research made allegations against the conglomerate, such as fraudulent transactions and share-price manipulation. The group has rejected the charges, saying it complies with all laws and disclosure requirements.

Adani Enterprises had called off its Rs 20,000-crore follow-on public offer (FPO) late on February 1, citing market volatility, after the company’s price had fallen below the offer price of shares.

Other than the Adani matter, the Sebi board may discuss proposals announced in the Budget including reviewing regulations by financial-sector regulators in consultation with stakeholders.

Highlighting the need to ease and reduce the cost of compliance, Sitharaman had said regulators would be requested to carry out a comprehensive review of existing regulations.

The board may also review the global and domestic market situation and associated challenges, the official cited above said.

On the table

• Finance minister Nirmala Sitharaman to address Sebi board as a part of customary practice after presenting the Budget 
   
• Sebi board may apprise the FM about the current regulatory framework and surveillance mechanism 
   
• Norms relating to foreign money coming into India by using offshore tax havens could be discussed