Recently, a huge crash was observed in Adani share prices. The Fall in Adani Shares shed around $7 Billion. One of their shares fell around 25%. There were also rumours about the accounts of three foreign funds under the Adani group being frozen by the National Securities Depository Limited (NSDL).
What is the National Securities Depository Limited (NSDL)?
NSDL is an organization and India’s biggest depository to hold and protect bonds or securities traded in the market. Formerly, these were recorded as paper transactions and were later switched to the electronic form.
The NSDL can be perceived as a bank. Citizens deposit money in a bank. Similarly, the NSDL works as a depository to store shares, stocks, securities etc. For example, if I buy a Reliance share, it would be deposited in my NSDL account. Or if I sell that share, it will be debited from the depository account.
Most of the Adani shares crashed on the 14th of June. Some of the values as of the 14th of June are listed below:
1. Adani Total Gas fell 5 per cent to Rs. 1,544.55
2. Adani Green Energy by 5 per cent to Rs. 1,165.35
3. Adani Transmission by 5 per cent to Rs. 1,517.25
4. Adani Power by 5 per cent to Rs. 140.90
5. Adani Enterprises by 11.28 per cent to Rs. 1,420.80
What caused Fall in Adani Shares?
The Economic Times published an article titled “Accounts of 3 Foreign Portfolio Investors (FPIs) owning Adani group shares frozen” on the 14th of June. There were also other rumours about the NSDL freezing shares that triggered the fall of Adani shares. The accounts of 3 foreign funds held around $6 billion worth of shares in the Adani companies. The 3 accounts were namely:
1. Albula Investment Fund
2. Cresta Fund
3. APMS Investment Fund
These funds own more than Rs. 43,500 crore worth of shares in 4 Adani Group Companies. The report suggested that the accounts were frozen on or before the 31st of May.
The promoters of Adani Enterprises have around 66% of shares. The general public holds 2.75% of the shares and the Foreign Institutions hold around 20%.
About the 3 funds
The 3 accounts, i.e, Albula Investment Fund, Cresta Fund and APMS Investment Fund are registered as Foreign Portfolio Investors (FPIs) with the Securities and Exchange Board of India (SEBI). They are based in Mauritius. As a whole, they hold:
1. 6.82% in Adani Enterprises
2. 8.03% in Adani Transmission
3. 5.92% in Adani Total Gas
4. 3.58% in Adani Green
These shares had performed well in the last year.
The Adani Group later clarified that the reports about the accounts being frozen were wrong leading to some recovery in stocks.
The NSDL also dismissed the rumours.
When is an account frozen by the NSDL?
According to Stock Advisory Company when there is insufficient disclosure of information about ownership according to the Prevention of Money Laundering Act (PMLA), the NSDL has the right to freeze that account.
What are the consequences if an account is frozen by the NSDL? If an account is frozen by the NSDL, the funds would not be able to sell existing securities. Also, as an impact of the frozen account, the funds would not be able to buy new securities.
This leads to a downfall in the prices of shares.
Join- Stock Market Courses