The Gautam Adani-led Adani Enterprises Ltd says it received two show-cause notices (SCNs) from market regulator Securities and Exchange Board of India (SEBI) over alleged non-compliance in related party transactions. However, it says there is no material consequential effect of these SCNs.
In a regulatory filing, the Adani group flagship says, "During the quarter ended 31 March 2024, the parent company has received two show cause notices (SCNs) from the SEBI alleging non-compliance of provisions of the Listing Agreement and LODR Regulations pertaining to related party transactions in respect of certain transactions with third parties and validity of peer review certificates of statutory auditors with respect to earlier years."
"The management believes that there is no material consequential effect of above SCNs to relevant financial statements and no material non-compliance of applicable laws and regulations," it added.
Following the Hindenburg report published on Adani group companies in January 2023, Adani Enterprises says it undertook a review of transactions referred to in the short-seller's report (SSR) in April 2023 through an independent assessment by a law firm. "The law firm's assessment revealed that none of the alleged related parties mentioned in the SSR were related parties to the parent company or its subsidiaries."
During the quarter that ended 31 March 2023, Adani Enterprises said an SSR was published, making certain allegations against some of the Adani group companies. Certain writ petitions were filed with the Supreme Court (SC) seeking an independent investigation of the allegations in SSR.
During the proceedings, SC observed that SEBI was investigating the matter. SC also constituted an expert committee to investigate and suggest measures to strengthen existing laws and regulations. It also directed SEBI to consider certain additional aspects of its scope. On 6 May 2023, the expert committee submitted its report, finding no regulatory failure with respect to applicable laws and regulations. SEBI also concluded its investigations in 22 of the 24 matters as per the status report dated 25 August 2023 to the SC.
On 3 January 2024, the apex court disposed all matters in various petitions including those relating to separate independent investigations relating to the allegations in the Hindenburg report.
Noting that SEBI has completed the investigation in 20 out of 22 matters, SC says, "Taking into account the assurance of the solicitor general, we direct SEBI to complete the investigation in the other two cases within three months.
"Reliance on newspaper reports and third-party organisations to question the statutory regulator does not inspire confidence. They can be treated as inputs but not conclusive evidence to doubt the SEBI probe. This Court has not interfered with the outcome of the investigations by SEBI, which should take its investigation to its logical conclusion in accordance with the law. The facts of this case do not warrant a transfer of investigation from SEBI," held a bench presided over by chief justice Dr DY Chandrachud.
The apex court said that reports prepared by third-party organisations such as the Organised Crime and Corruption Reporting Project (OCCRP) and Hindenburg Research cannot be regarded as 'conclusive proof'.
In August 2023, OCCRP, in an article, said that crores of rupees were invested in listed stocks of India's Adani group via 'opaque' funds from Mauritius that 'obscured' the involvement of alleged business partners of the Adani family. OCCRP also reported that two men, Nasser Ali Shaban Ahli (Nasser) of the United Arab Emirates (UAE) and Chang Chung-Ling (Chung-Ling) (Chinese/Taiwan), who are treated as public investors in stock exchange filings, are actually Adani insiders, which is a violation of Indian laws. This also reduced the free float of the stock, helping to manipulate the prices with less funds. (
Read: Adani Family Secretly Invested in Own Shares, Through 'Opaque' Funds, Alleges Non-profit International Investigative Media Group OCCRP)
Adani Enterprises says, "Based on the independent assessment, the SC order and the fact that there are no pending regulatory or adjudicatory proceedings as of date, except as mentioned above, the management concludes that there is no material non-compliance of applicable laws and regulations and accordingly, these financial statements do not carry any adjustments in this regard."
The controversial Hindenburg Research's report, inter alia, alleged that the Adani group of companies has manipulated its share prices, failed to disclose transactions with related parties and other relevant information concerning related parties in contravention of the regulations framed by SEBI and violated other provisions of securities laws.
Last month, Reuters reported that SEBI found that a group of offshore funds investing in companies under the Adani umbrella have breached disclosure regulations and exceeded investment thresholds. These insiders, preferring anonymity as they lack authorisation to engage with the media, revealed the findings to the agency.
Moreover, the regulator has been scrutinising the relationship between the Adani group and one of these funds to ascertain whether there is evidence of coordinated action with the conglomerate's principal stakeholders—a claim Adani has consistently refuted, the report says.
Earlier this year, SEBI issued notifications to about 12 offshore investors associated with the Adani group outlining the alleged violations and requesting explanations regarding their non-compliance with disclosure rules and investment ceilings, as disclosed by the sources to Reuters.
