SEBI on Adani Stock Price Movement: Committed to Ensuring Market Integrity, Observed Unusual Price Movement

On February 4, market regulator SEBI noted that shares of Adani Group, a troubled conglomerate, were experiencing unusual price movements.

The regulator said that in all specific matters related to the entity, if any information comes to SEBI’s knowledge, it will be examined, and take appropriate measures.

The Securities and Exchange Board of India (SEBI) has said that it will ensure the integrity of the market and good structural soundness in the event of potential manipulation of the market price of Adani Group shares. Sebi’s statement comes shortly behind the Reserve Bank of India (RBI) report on the Adani Group crisis.

“Over the past week, we have noticed unusual price movements in the shares of a trading group,” SEBI said in a statement. He said his monitoring wing under the market regulation department is looking into the matter. It added: “Further investigation is underway.”

SEBI’s mandate is to maintain an orderly and efficient market, and it has established a set of well-defined monitoring measures to address excessive volatility in specific stocks. By sharing these metrics with the public, SEBI hopes to establish a more open marketplace that works better for everyone involved.

On February 2, the National Stock Exchange (NSE) placed three securities, namely Adani Enterprises, Adani Ports, and Ambuja Cements, under the framework of Additional Monitoring Measures (ASM) with effect from February 3, 2023.

Adani Companies share prices rose sharply on Friday ahead of its board meeting, which is expected to see a key decision on the company’s move to sell a stake in its flagship coal mining unit to the giant. Glencore miner for $2.5 billion. The Adani Group board has not yet approved the transaction of directors. Adani Enterprises shares were trading higher at Rs. 202.30 on BSE, while Adani Ports and SEZ were trading around Rs. 544.45.

The Adani group had run into trouble after a research report by US short-seller Hindenburg alleged gaps in the group’s finances, a high debt load, and risk of overvaluation. This led to a sharp drop in the share prices of Adani group companies.

Adani Group’s proposed Rs 20,000 crore follow-up share sale has been called off due to a sharp drop in the company’s share price. This is yet another blow to the group already in financial trouble.

Subsequently, concerns rise as reports suggest that several large Indian banks have fund-based and non-fund-based exposure to the group, which CLSA reports estimate at 38 percent of the company’s total exposure. If the company goes bankrupt, these big banks will leave with huge debt.

Thirty-seven percent comes from bonds/commercial paper, 11 percent from financial institution loans, and the remaining 12-13 percent from intragroup loans, leaving little room for other funding sources, according to the report.

The Reserve Bank of India (RBI) issued a statement shortly after the country’s largest lender, the State Bank of India (SBI), dismissed concerns over its Rs 27 billion exposure to the Adani group. SBI said this exposure is less than 0.9% of its loan book and is not a cause for concern.

“Based on the Reserve Bank’s current assessment, the banking sector remains resilient and stable,” the RBI said in a statement released on the evening of February 3. Typically, the RBI issues statements of this type to appease stakeholders when fears of a potential liquidity crunch after certain events hit the banking system.

RBI mentioned that it monitors the risk profile of a particular business group in the Indian banking sector concerning the Adani group.

The central bank did not name the group or business group but said the RBI “will continue to provide a cautious and appropriate response to emerging risks in the banking sector.”

Ajay