SEBI Clearance For Adani Group Sends Positive Signals To Investors: Crossbridge Capital

The Securities and Exchange Board of India's (SEBI) clean chit to the Adani Group will strengthen investor confidence and may also lead to an upward re-rating for the group, Manish Singh, the chief investment officer at Crossbridge Capital, has said.

Speaking to NDTV Profit, Singh said, “Investors rely on market regulators to iron out things when questions arise on the legitimacy of a particular business. So, when the regulator steps in and investigates the matter and deems a certain company clean, it gives a big boost to investors' confidence.”

#SEBI's Clean Chit To Adani: Big boost not only for #Adani Group but also for India, says @CrossbridgeView's Manish Singh. @Heeraal @_nirajshah

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The remarks came after SEBI dismissed US short-seller Hindenburg Research's allegations against Adani Group Chairman Gautam Adani and key group companies, including Adani Enterprises, Adani Ports, and Adani Power.

Hindenburg had claimed in January 2023 that Adicorp Enterprises, Milestone Tradelinks and Rehvar Infrastructure were used to route funds among Adani companies.

SEBI, however, concluded in two separate orders that there were no violations, adding that at the time of the transactions, dealings with unrelated parties did not qualify as related-party transactions, a definition that was subsequently revised.

Singh said that regulatory clarity plays a major role in shaping investor sentiment. It strengthens investor confidence, which is important for attracting foreign investment. “So if SEBI gives them a clean chit, that's a big boost not just for Adani Group but for India as well. Any foreign investor who is looking to put money in India will look at how the regulators are, how much control they have and what they are doing,” he said.

According to Singh, when investors see that regulators have investigated and cleared a company, it reassures them about the legitimacy of the business and reduces uncertainty in the market.

Discussing potential market implications, Singh pointed to the possibility of a re-rating of Adani Group valuations. “I would expect a re-rating in terms of multiples to happen, because when aspersions are cast on a company, investors wait for them to be resolved before presenting the stock or investment to their committees,” he said.

Singh added that with those doubts now cleared, large investors, who operate through investment committees and require consensus, can move forward. Consequently, the stock may be re-rated, and when combined with strong earnings, this boosts its overall value, he said.

Singh emphasised the broader significance of SEBI's ruling for India. “SEBI's clean chit is important for India because the cost of capital in India is high, and it's a big factor in India's development story. So, if confidence in a business erodes, the cost of capital goes up,” he said.