Unearthing regulatory infractions, the Securities and Exchange Board of India (SEBI) has identified around twelve offshore funds with investments in Adani Group companies that have apparently failed to adhere to stipulated disclosure norms and have exceeded prescribed investment thresholds. According to two sources privy to the matter, who requested anonymity due to the sensitive nature of the information and because they are not authorized to discuss the matter with the press, SEBI’s findings have sparked a fresh wave of scrutiny over the conglomerate’s investor practices.
SEBI, which operates as the watchdog for securities markets in India, and the Adani Group were contacted for their comments on the matter but did not immediately respond to emails seeking their remarks.
This revelation by the regulator is not an entirely new development, as Reuters had already reported in the previous August about the discovery of violations concerning disclosures from listed entities and limitations on holding amounts by offshore funds. SEBI’s ongoing investigation includes examining the relationship between the Adani Group and one of the funds to determine if the entities could be considered to be acting “in concert” – a term which implies coordinated efforts among a company’s key shareholders that could affect control or influence over the company.
This inquiry aligns with accusations previously denied by the Adani conglomerate, which has consistently maintained its stance on the independence of its shareholders’ actions. Earlier this year, SEBI initiated formal proceedings, dispatching notices to approximately a dozen offshore investors linked to the Adani group. These communiqués presented the allegations and demanded explanations concerning the breaches in disclosure mandates and investment limit overreaches.
Providing insight into the infractions, one of the sources elucidated that the foreign funds had been filing investment reports on a fund-by-fund basis, whereas the regulator’s expectation was to have these reported collectively at the group level for the offshore fund entities. Transparency and adequate disclosure are critical for maintaining fair and orderly markets, and identifying the true extent of a fund group’s holding is paramount for SEBI to monitor market impact and potential investor influence.
In a twist that suggests a possible move towards resolution, eight of the implicated offshore funds have proactively reached out to SEBI. They have filed written requests seeking to resolve the matter by means of a settlement, wherein they would pay a penalty without formally admitting to any wrongdoing. These overtures suggest a recognition of the gravity of SEBI’s concerns and reflect a willingness among some funds to close the chapter on these allegations without dragging the disputes through a protracted legal process.
The outcome of these negotiations will not only have significant implications for the Adani Group but may also impact how offshore funds engage with Indian securities, potentially ushering in a new era of stricter compliance and oversight. It is of paramount importance for market integrity that all market participants adhere to the rules and regulations that have been carefully crafted to ensure a level playing field, and to instill confidence in both domestic and international investors.
While the markets await a formal response from SEBI and the Adani Group, this scenario underscores the complexities of navigating the global investment landscape, particularly for conglomerates with extensive cross-border financing operations. The final resolution of these violations will be closely observed as it is poised to have far-reaching repercussions for India’s corporate and regulatory environment.
