About twelve companies, some of which are from other countries and are considered as financial investors, have been found out by the Enforcement Directorate (ED) to have benefited the most from a trading strategy called “short selling” in Adani Group’s shares. This information was reported by The Indian Express.
The ED shared this information with the Securities and Exchange Board of India (SEBI) in July after it looked into a report by Hindenburg Research and the resulting drop in the stock market.
Short selling works like this: People borrow and sell shares, hoping to buy them back later at a lower price.
Some of these companies that benefited from short selling started doing this just a couple of days before the Hindenburg Research report came out. The ED’s investigation showed that three of these companies are based in India, one is connected to a foreign bank’s branch in India, four are in Mauritius, and one each in France, Hong Kong, the Cayman Islands, Ireland, and London.
These companies haven’t told the tax authorities about who owns them. For example, one company was created in July 2020 but didn’t do anything until September 2021. In just six months from September 2021 to March 2022, it said it made Rs 1,100 crore even though its business turnover was Rs 31,000 crore.
Another global financial services group, which works like a bank in India, didn’t earn much in India but said it made Rs 9,700 crore as a foreign investor without paying taxes.
One of the companies based in the Cayman Islands, which is listed as a top beneficiary, had admitted to breaking the rules about trading based on insider information before and had paid a $1.8 billion fine in the US. This company started selling short on Adani Group’s shares on January 20 and then did more of it on January 23. Another company from Mauritius, which had never done short selling before, started doing it on January 10.
Among the main companies that were doing short selling, two were from India. One was registered in New Delhi, and the regulator SEBI had already taken action against its owner for tricking investors and manipulating the stock market. The other was registered in Mumbai.
The ED gave its findings to a group of experts set up by the Supreme Court to look into why there were problems with regulating the Adani Group. This group said that some parties might have broken the rules and suggested that SEBI should investigate.
SEBI, in its latest update to the Supreme Court, said it had finished looking into 22 reports, including one about how some companies were trading or betting against the Adani Group’s companies when the Hindenburg report was published. SEBI is waiting for more information from other groups outside of India.
The ED thinks that these foreign companies might actually be working as middlemen for bigger players in other countries and not really making money themselves from the short selling.
Read complete article here: Firms gained from short selling in Adani Group shares: Report