Hindenburg Effect Continues! SEBI Investigating Adani Group's Transactions For Possible Violation Of Rules

Barely a week after SEBI¡¯s chairperson Madhabi Puri Buch refused to comment on Adani vs Hindenburg issue, India¡¯s market regulator seems to have finally taken a step towards the investigation.

Earlier last month, ex-RBI governor Raghuram Rajan too had questioned SEBI (Securities and Exchange Board of India) for not investigating the issues raised by Hindenburg against Adani.

SEBI Investigating Adani Group's Transactions

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And now, SEBI is investigating a possible violation of ¡¯related party¡¯ transaction rules in the Adani Group¡¯s dealings with at least three offshore entities that have links to the brother (Vinod Adani) of the conglomerate¡¯s founder Gautam Adani.

The three entities allegedly entered into several investment transactions with unlisted units of the ports-to-power conglomerate founded by billionaire Gautam Adani over the last 13 years, said the sources with direct knowledge of the matter, as per Reuters report.

India's market regulator SEBI suspects there were ¡±disclosure violations¡± on some transactions, said one of the two sources.

If proven, it could lead to monetary penalties and the matter may be referred to India¡¯s Ministry of Corporate Affairs (MCA) for transactions that are beyond SEBI jurisdiction, the source said.

Also Read: Meet Nathan Anderson, The Man Behind Hindenburg Report

What SEBI Said About Vinod Adani

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Vinod Adani, Gautam Adani¡¯s brother, is either a beneficial owner, director or has links with those three offshore entities, said the two sources, adding that the regulator SEBI is probing if lack of that disclosure violated ¡¯related party transaction¡¯ rules.

Under Indian laws, direct relatives, promoter groups and subsidiaries of listed companies are considered related parties.

A promoter group is defined as an entity that has a large shareholding in a listed company and can influence company policy. Transactions between such entities have to be disclosed in regulatory and public filings and require shareholder approval above a specified threshold. Violations typically attract monetary fines.

The three offshore entities with links to Vinod Adani being probed for ¡¯related party¡¯ transactions are Mauritius-based Krunal Trade and Investments Ltd and Gardenia Trade and Investments Ltd, and Electrogen Infra in Dubai. Other similar transactions are also reportedly under regulatory examination.

An Adani Group spokesperson said Vinod Adani is a member of the Adani family and is part of the promoter group, but he does not hold any managerial position in any of the listed Adani entities or their subsidiaries, as per the report.

¡±This fact, like all other material information required to be reported, has been disclosed to the regulatory authorities in the past and also as and when required,¡± the spokesperson added, without commenting on the regulatory probe into offshore entities.

India¡¯s Supreme Court asked SEBI in March to investigate the Adani Group for any lapses related to public shareholding, related party rules or regulatory disclosures. SEBI¡¯s investigation into Adani¡¯s possible ¡¯related party¡¯ transactions with offshore entities with links to Vinod Adani has not been reported before.

Hindenburg's Allegations Against Vinod Adani

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Hindenburg in its January 24th report alleged that Vinod Adani entities have collectively moved ¡±billions of dollars¡± into Adani¡¯s publicly listed and private entities, often without required disclosure of the related party nature of the deals.

In its 413-page response, the Adani Group said that all transactions entered into by it with entities who qualify as ¡¯related parties¡¯ under Indian laws and accounting standards have been duly disclosed, as per the report.

Also Read: 17 Companies Against Which Hindenburg Research Has Alleged Fraud

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