New Delhi: In a significant development, the Securities and Exchange Board of India (SEBI) chairperson Madhabi Puri Buch on April 2 made a detailed presentation to the six-member committee set up by the Supreme Court on the Adani Group-Hindenburg Research matter, people familiar with the issue told the Economic Times.
According to the business daily, the presentation covered disclosures on related party transactions by both listed and privately held Adani Group companies. It also covered other issues such as the group’s offshore companies, foreign portfolio investor holdings, and minimum stock market floats, the newspaper reported.
Apart from the top court panel, a SEBI team is also investigating the Adani Group for any lapses relating to the securities market as well as the market activity before and after Hindenburg Research published its report on January 24.
The newspaper added it will provide the required assistance to the court-appointed committee.
The SEBI team is also expected to conclude its investigation and submit its findings, in a sealed cover, to the committee within two months.
The apex court panel is headed by former Supreme Court judge A.M. Sapre, and comprises former bankers K.V. Kamath and O.P. Bhatt, Infosys cofounder Nandan Nilekani, securities lawyer Somasekhar Sundaresan and retired high court judge J.P. Devadhar.
Additionally, Buch also briefed the top court panel on SEBI’s policy for regulated short-selling and on policies followed in major international jurisdictions, the report added.
The SEBI chief also mentioned to the panel about the regulator’s existing investor protection mechanisms and what could be done to further strengthen them.
Also read: ‘Surprised We Don’t Have a Hindenburg in India’: Full Text of P.N. Vijay’s Podcast Interview
The allegations
Reuters reported over the weekend that SEBI is investigating a possible violation of ‘related party’ transaction rules in the Adani Group’s dealings with at least three offshore entities. These entities have links to the brother of the conglomerate’s founder, Vinod Adani, people aware of the matter told the news agency.
Earlier, the group had declared, as per CNBCTV18, that “the Adani Group and Vinod Adani should be seen as one“.
The Wire analysed how this might have a bearing on the free-float status of some companies in the Adani Group.
Publicly traded companies are required to have at least 25% of their shares held by non-promoters – be it retail investors, mutual funds, foreign portfolio investors (FPIs), and insurance companies – to stay listed on exchanges.
Data from Trendlyne shows in the case of Adani Group, a few offshore investment funds (or FPIs) hold most of the free float.
An analysis by The Wire said if the offshore funds are to be accounted for having links to the Adani family, then the free float would slip to just under 25%, or even less than that.
The Morning Context wrote an investigative piece on Adani’s offshore firms and said, “if you remove these [offshore] funds, the effective [public] shareholding in Adani Enterprises comes down to only 10%.” In Adani Transmission, the “effective public float is about 7-8%”.
However, the ownership of these funds is unknown because Mauritius is a tax haven. And this concern was raised by SEBI in July 2021. It had asked the custodians of the FPIs who own shares in Adani’s listed firms to disclose the ‘ultimate beneficiary’.
A year later, in September 2022, Bloomberg columnist Andy Mukherjee had written about these “silent soldiers”, or “Adani’s fortune drivers”, and that “they deserve some scrutiny”.
Interestingly, in this piece, observe how the rest of the FPIs, whose details are not available online, keeps on increasing year on year.