5 February 2023

• Markets: Adani Enterprises' Rs 20,000 crore Follow-on Public Offer (FPO) was scrapped on 1 February after the Hindenburg Research short-seller report triggered a stock collapse. The Supreme Court was asked to examine investor protection.
• Regulation: SEBI's investor protection tools and the Additional Surveillance Mechanism came under scrutiny.
• Global health: the WHO's Intergovernmental Negotiating Body published the zero-draft Pandemic Treaty (1 February). India participated in negotiations.
• Governance: European Union announced the Green Deal Industrial Plan in response to the US Inflation Reduction Act, focusing on Net-Zero Industry and Critical Raw Materials legislation.

GS area: Economy, Polity (regulatory institutions)

Hindenburg Research, a US short-seller, published a report on 24 January 2023 accusing the Adani Group of stock manipulation, undisclosed related-party transactions, and use of offshore shell companies to inflate share prices. The consequences were immediate:

• Market impact: Adani Group stocks lost more than $100 billion in market capitalisation within days of the report.
• FPO withdrawal: Adani Enterprises had launched a Rs 20,000 crore FPO (Follow-on Public Offer). The offer was subscribed 1.12 times as of 1 February but was scrapped the same evening. The company stated it wished to protect investors from further financial losses.
• Supreme Court: the Court noted the volatility and sought a response from SEBI. It was concerned about the adequacy of the regulatory framework for protecting retail and middle-class investors.
• SEBI's framework: four laws govern securities markets: the SEBI Act 1992, the Securities Contracts (Regulation) Act 1956, the Depositories Act 1996, and the Companies Act 2013. SEBI can order suspension of trading, prohibit entities from dealing in securities, and issue show-cause notices.

A structural point worth noting: the episode exposed tensions between SEBI's disclosure-based regulation and the speed at which short-seller reports can move markets before regulatory responses are possible.

Static linkage: Indian Economy (capital markets, SEBI, investor protection).

GS area: Economy (securities regulation)

SEBI's Additional Surveillance Mechanism was applied to several Adani group stocks in the wake of the controversy:

• ASM introduced: 2018. A control measure for speculative trading to protect retail investors.
• How it works: stocks placed under ASM face a 100 per cent margin requirement. A buyer must put up the full value of a trade as margin before executing it. This sharply reduces leveraged speculation.
• In the Adani case: Adani Enterprises, Adani Ports and Ambuja Cements were placed under 100 per cent margin requirements.
• Circuit filters: stock exchanges also have circuit breakers (upper and lower price limits) that halt trading when prices move beyond a set percentage in a single session. These are separate from ASM.

Static linkage: Indian Economy (stock markets, SEBI tools, investor protection).

GS area: International Relations, Health

The World Health Organisation's Intergovernmental Negotiating Body (INB) published the zero-draft of a Pandemic Treaty (formally: International Instrument on Pandemic Prevention, Preparedness and Response) on 1 February 2023:

• Purpose: binding international agreement to ensure coordinated global response to future pandemics. Lessons drawn from COVID-19.
• Key provisions in the draft: intellectual property rights (technology sharing during emergencies), transparency in reporting outbreaks early, equitable benefit-sharing from pathogen samples, and pandemic preparedness financing.
• Target: final document for adoption at the World Health Assembly in 2024.
• India's interest: India is a major vaccine producer. The IP provisions around compulsory licensing and technology transfer are particularly sensitive.
• INB: the body set up by the WHA in December 2021 specifically to negotiate this instrument. It reports to the WHA.

Static linkage: International Relations (multilateral health governance, WHO, pandemic preparedness).

GS area: International Relations (global economy)

The European Union announced its Green Deal Industrial Plan in response to the US Inflation Reduction Act:

• Motivation: the US Inflation Reduction Act (IRA, 2022) provides large subsidies for clean technology manufactured in the US. The EU feared that European manufacturers would shift investment to the US. The Green Deal Industrial Plan is the EU's counter.
• Net-Zero Industry Act: proposes simplified permitting for renewable energy and net-zero technology projects within the EU. The target is to manufacture 40 per cent of EU clean technology needs domestically by 2030.
• Critical Raw Materials Act: ensures EU access to rare earth elements and other strategic materials needed for clean technology. Reduces dependence on China for rare earths.
• Net-Zero Industry Academies: new training centres to reskill the workforce for clean energy industries.

Static linkage: International Relations (EU policy, clean energy economics, trade policy).

GS area: Science and Technology

NISAR (NASA-ISRO Synthetic Aperture Radar) received fresh attention as its launch schedule approached:

• Mission: a joint Earth-observation satellite developed by NASA and ISRO. Will carry two radar bands.
• Radars: L-band from NASA (longer wavelength, penetrates vegetation and soil) and S-band from ISRO (shorter wavelength, better for surface mapping). Dual-frequency synthetic aperture radar is its defining capability.
• Applications: measuring land deformation (earthquakes, volcanoes, landslides), ice sheet changes, ecosystem carbon stocks, groundwater changes, and sea-ice extent.
• Antenna: a 39-foot stationary antenna reflector with a gold-plated wire mesh for radar signal transmission.
• Significance: one of the most expensive Earth science missions ever. Demonstrates deep technical collaboration between ISRO and NASA beyond crew spaceflight.

Static linkage: Science and Technology (ISRO, remote sensing, India-US cooperation).

• Adani FPO timing: the FPO was the world's largest for a non-financial company at the time. Its collapse within days of subscription closing illustrated the speed at which reputational and information shocks can undo capital-raising plans.
• Russia-SPFS: Russia proposed that Indian financial institutions adopt the SPFS (System for Transfer of Financial Messages), Russia's alternative to SWIFT. Twenty Russian banks had already opened Special Rupee Vostro Accounts with Indian partner banks by this period.
• SEBI on greenwashing: SEBI issued notification requiring issuers of green bonds to continuously monitor and disclose environmental sustainability outcomes. Prevents misleading environmental claims in fundraising.