SEBI cracks the whip on Adani group, bars it from capital market for 2 years

M. Damodaran, at the helm of affairs at SEBI, has contributed a lot towards the benefit of the common investors of the country. After bailing out UTI and IDBI, he has come done heavily on market intermediaries and companies involved in scams. The latest to face the belt is the Gujarat based Adani group, having interests in Global Trading, edible oil refining, gas distribution, call centre, logistics, infrastructure, fertilizers, SEZ and ports.

The promoters of Adani group have restrained from accessing the capital market, directly or indirectly for two years, as investigations showed movement of shares and funds between the Adani Group and Ketan Parekh entities, which were used for manipulating the securities market and making payments at the time of settlements in the stock exchange. There are also charges of manipulative activities such as synchronized trading/circular trading and creation of artificial volume to influence the share prices of Adani entities.

Historical data shows that at BSE, Adani Enterprises’ (listed arm of Adani group) share price has been quite volatile during 1999-2000 period with abnormal gains and losses. Similarly, last year, the share price was in upward circuit for many days continuously but that was because of the real estate story involved in the company.

The company had also filed a draft prospectus with SEBI for its Mundra Port and SEZ for Rs. 1,500 crores. The IPO would had been the first of its kind in India, as it the first from an SEZ and port sector to enter the capital market.

The share of Adani Enterprises (formerly Adani Exports) would surely go into the lower circuit for many days with thin volume trades. This is similar to what happened with Atlanta Construction and Gammon India, when similar restrictions were imposed, where investor’s wealth were eroded massively. However, as has been seen from the past experiences, such scrips after touching new lows, eventually bounce back with upper circuits, but it’s a risky call to take.