New Delhi: A report by The Ken triggered a sell-off on March 28 that led to a Rs 50,000-crore loss in Adani Group’s market capitalisation.
The report raised questions on whether Adani Group had actually repaid debt worth $2.1 billion that were taken by pledging shares in the conglomerate’s listed firms. (In simple terms, share pledge means taking loans against shares held.)
It alleged that the debt may not have been fully paid as the listed firms didn’t make any disclosures to the bourses.
As per the law, banks and listed firms are obligated to disclose to stock exchanges the release of shares upon repayment of debt, The Ken reported.
Six Adani stocks – Adani Power, Adani Transmission, Adani Green Energy, Adani Total Gas, Adani Wilmar and NDTV – hit the lower circuit on Tuesday, the Financial Express reported.
Following the report, stock exchanges NSE and BSE sought clarification from Adani Enterprises on this matter.
However, The Ken’s story was updated on March 29 with the Adani Group’s statement saying, “As per the present rules, any share pledge or release is automatically reported by system-driven disclosure (SDD) mechanism of the depository participant, and no separate filing is required to be made.”
The BSE website reflected the updated SDD details pertaining to Adani Enterprises, Adani Green Energy, Adani Transmission and Adani Ports hours after The Ken published its story. But the regulatory filings were available on the website of NSE. It showed that pledges had come down substantially as compared to three months ago, The Morning Context reported.
It appears that The Ken’s story only checked data on the BSE, and not NSE, which had this data. However, it is important to note that BSE is also mandated by the Securities and Exchange Board of India to publish such information.
“In other words, there should ideally have been no need to cross-check data available at the two stock exchanges,” The Morning Context said in its report.
Meanwhile, Adani Group’s chief financial officer Jugeshinder Singh slammed the report, saying that stock exchanges update the data on promoter pledge shares after the end of the current quarter.
Also read: Questions SEBI Needs to Ask Adani Group, Now That It Is Owning Up to Brother Vinod
As per SEBI rules, when a pledge is created or released, companies need to intimate the stock exchanges, as earlier mentioned. This process used to be done in writing until 2015, when SEBI began automating disclosures relating to promoter stakes and pledges, The Morning Context said. These disclosures are called system-driven disclosures, or SDDs.
So it falls within the BSE’s purview to update the data.
The companies creating pledge over shares are required to register a charge on the shares held by a depository. So SEBI stipulated that whenever a charge is created or withdrawn, depositories should intimate the registrars of the company. The registrars, in turn, will report to the stock exchanges.
This was done to ensure better flow of material information to the market.
In the case of Adani Group, it appears that the registrars didn’t do their job in informing the BSE.
Although SEBI began the system-driven disclosures in 2015, it did not put in place a mechanism to ensure that the information was finally updated on the BSE, the report added.