12 companies catapulted their earnings by short selling in Adani group shares: Report
Updated: Aug 30th, 2023
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| Gautam Adani during Adani AGM (img: IANS) |
12 companies have been listed by the enforcement directorate (ED) included in the foreign portfolio investment (FPI) and foreign institutional investment (FII), which have made exponential profits by short-selling Adani group shares, as per news reports.
ED submitted this report to the stock market watchdog, the securities and exchange board of India (SEBI), in July.
ED report uncovers firms making a fortune by shorting Adani shares
As per the ED report, many of these 12 companies had shorted their positions 2-3 days before the report was published by American short-selling company Hindenburg.
Generally, short sellers profit by borrowing and selling shares, hoping to buy them back at a lower price later.
Alongside domestic investors, SEBI-registered FPIs and FIIs have permits for trading in derivatives in the Indian market.
Many of these 12 companies originated from tax havens across the world, and a few of them were engaging in short selling for the first time.
Three of them were from India. Four of these companies were from Mauritius, and the remaining five were from France, Hong Kong, the Cayman Islands, Ireland, and London.
It is mentioned in the ED report that some of these companies made crores in mere months.
One of the companies, officially registered in July 2020, made zero business until Sept 2021. Come September, the company made ₹1,100 cr with a turnover of ₹31,000 cr in six months till Mar 2022.
Another company, a financial servicing group operating as a bank in India, which had only registered an income of ₹122 cr, made a whopping ₹9,700 cr as an FII from the Indian market.
The company that possessed the ownership of the Cayman Islands-based firm was an insider trading offender and was fined nearly $1.8 bn (₹14,880 cr) in the US.
A few days before Hindenburg released its report, a Mauritius-based company had taken a short position in the Adani group on Jan 10, while another took the short position on Jan 20 and later increased it on Jan 23.
It is noteworthy that the income tax department was not informed of the ownership structure of any of these companies.
SEBI knocks SC’s doors in Adani-Hindenburg saga
The hearing of the SEBI’s status quo report in the Hindenburg-Adani case has been adjourned by the Supreme Court, as the chief justice of India (CJI)-led bench is currently hearing a round of pleas against the abrogation of Article 370.
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