It has been revealed that a total of 12 companies, including foreign portfolio investors (FPIs) and foreign institutional investors (FIIs) operating from tax havens, gained from short-selling shares within the Adani Group. This information was reportedly shared with the Securities and Exchange Board of India (SEBI) by the Enforcement Directorate (ED) in July.
According to the ED’s findings shared with SEBI, some of these entities strategically entered short positions just 2-3 days before the Hindenburg Research report was released on January 24. Notably, a few of these companies were engaging in short selling for the very first time.
Both domestic investors and FPIs/FIIs registered with SEBI are permitted to partake in derivative trading, which involves taking short positions to manage market risks. SEBI promotes regulated short selling, viewing restrictions as potentially leading to distorted price discovery and enabling manipulative practices by promoters.
Sources have disclosed that among the 12 entities, three are based in India (one being the Indian branch of a foreign bank), four are in Mauritius, and one each are located in France, Hong Kong, the Cayman Islands, Ireland, and London. Notably, none of the FPIs/FIIs have disclosed their ownership structures to the Income Tax authorities.
These revelations have intensified discussions about the practices of short selling, with regulators emphasizing the importance of transparency in ownership structures to ensure fair market operations and thwart potential manipulation.