Adani Group Companies Face Sebi Scrutiny for Alleged Non-Compliance
The Securities and Exchange Board of India (Sebi) has served show-cause notices (SCNs) to all seven listed Adani group companies for alleged non-compliance with regulations, primarily related to related party transactions (RPTs).
The notices were issued during the March 2024 quarter and allege violations of listing agreement provisions and disclosure requirements. However, the companies have stated that the allegations are not materially consequential and do not warrant any adjustments to their financial statements.
Sebi's investigation into the Adani group was initiated following a report by US-based Hindenburg Research, which alleged various violations, including manipulation of stock prices and circumvention of minimum public shareholding norms.
Legal experts believe that the allegations against the Adani group are not particularly serious and that the markets have reacted calmly. They also point out that violations of Listing Obligations and Disclosure Requirements (LODR) Regulations can often be settled through consent or attract minimal penalties.
However, Sebi can impose more severe penalties, including barring companies or management from accessing capital markets, if the violations are deemed serious. The regulator may also serve additional notices if further investigations reveal more violations.
The Adani group has denied the allegations and stated that the transactions in question were fully compliant with applicable laws and regulations. The group also initiated an independent review by a law firm, which confirmed that none of the alleged related parties were related to the parent company or its subsidiaries.
Following the Hindenburg report, the value of Adani group companies fell significantly. However, the group has since seen a rebound in its market value, driven by deleveraging efforts and a sale of promoter shares to the GQG Group.
The Supreme Court has directed Sebi to complete its investigation into the Adani group within three months. Sebi has already completed investigations in 22 of 24 cases. The regulator has also served SCNs to some foreign portfolio investors (FPIs) with large exposure to Adani group companies. Some of these FPIs are reportedly looking to settle the allegations through consent.