The Indian government agreed to the Supreme Court of India to billionaire Gautam Adani’s conglomerate. The Adani Group announced that it had hired accountancy firm Grant Thornton to conduct independent audits of its businesses.
This comes after Adani Group companies lost ten trillion rupees or slightly more than half of their total market capitalization. On the Indian stock exchanges following a January 24 report by the US short-selling activist firm Hindenburg Research alleging widespread fraud. The Adani Group completely denies the allegations.
MSCI responded by reducing the weighting of Adani Group firms in international mutual funds, and the Norwegian sovereign wealth fund, one of the world’s largest institutional investors, divested from Adani stocks.
There was some concern that this destruction would have a widespread economic impact on India. Adani is close to Prime Minister Narendra Modi’s government, which may have been tempted to shield Adani from scrutiny. However, today’s announcement that the government supports an investigation into Adani’s dealings indicates that this will not happen.
Petitioners filed a public-interest lawsuit in India’s Supreme Court, requesting an investigation into the Adani Group’s business. Unlike in the United States, the Supreme Court of India can hear cases in which the parties do not need to demonstrate standing as long as they act in the public interest.
The Securities and Exchange Board of India, i.e., SEBI, the country’s stock-market regulatory agency, is already looking into the Hindenburg allegations and market activity in the report’s aftermath. SEBI stated that it is “strongly and adequately empowered to establish regulatory frameworks for achieving stable operations and development of the securities markets.”
Last week, the Supreme Court directed the government to form an expert panel led by a retired judge to investigate the incident. According to Solicitor General Tushar Mehta, the government believes that the current regime, regulators, and agencies can deal with such situations. It would not oppose the Supreme Court’s proposed to form an expert committee to strengthen the current regime.