Adani saga: Report suggests SEBI found technical faults in disclosure rules

In a report published on Monday, 28 August, international news agency Reuters quoted sources with direct knowledge of market regulator SEBI’s (Securities and Exchange Board of India) investigation of the Adani Group to claim that it had uncovered violations of rules regarding disclosures by listed entities and limits on the holdings of offshore funds.

SEBI had initiated the investigation after the US-based Hindenburg Research raised governance concerns regarding the Gautam Adani-led group, reducing the market value of its companies by more than $100 billion. In January, the ports-to-power conglomerate refuted any wrongdoing.

SEBI follows a quasi-judicial process before publishing an order against an entity, including providing the entity with an opportunity to defend itself. The regulator can recommend various actions, ranging from monetary penalties to banning entities from stock markets, depending on the severity of the violations. However, the penalties that SEBI will ultimately recommend in the Adani investigation remain unclear.

The investigation also uncovered discrepancies in the holdings of offshore funds in some Adani companies, which were not in compliance with the rules. Indian law permits offshore investors to invest a maximum of 10 per cent in an Indian company through the foreign portfolio investor route, with larger investments classified as foreign direct investment.

“There are some inadvertent breaches of this limit by some offshore investors,” the report said, without providing specific details about potential fines for such breaches.

The specific companies investigated by the regulator have also not been disclosed by Reuters.

In response to allegations by Hindenburg Research in January, the Adani Group stated that all related party transactions had been fully identified and disclosed. The group also noted that it could not comment on the trading patterns of offshore investors, as they were public shareholders.