Adani’s ties to at least two anchor investors that are located in Mauritius are being looked into by SEBI.
According to two sources, the market regulator in India is looking into the connections between Adani Group and some of the investors in the conglomerate’s canceled $2.5 billion share sale. This comes as New Delhi grows increasingly alarmed over claims made against one of the top industrial groups in the nation by a short-seller based in the United States.
According to the two sources with intimate knowledge of the situation, the Securities and Exchange Board of India (SEBI) is investigating any potential violations of Indian securities rules or any conflicts of interest in the share sale process.
According to the individuals, who spoke on the condition of anonymity owing to the sensitive nature of the investigation, the watchdog is looking into connections between Adani and at least two Mauritius-based companies, Great International Tusker Fund and Ayushmat Ltd.
Any business connected to a company’s founder or the founder group is ineligible to qualify under India’s capital and transparency required guidelines for the anchor investor category. The focus of the investigation, according to one of the individuals, will be on whether any of the anchor investors are “linked” to the original group.
Since Hindenburg Research’s report on January 24 accusing the group of improper use of offshore tax havens and stock manipulation, the ports-to-energy conglomerate—controlled by billionaire Gautam Adani, one of the richest people in the world—has seen shares in its seven companies lose more than $100 billion in market value. The charges against Adani have been refuted.
Due to the sudden selloff, Adani Enterprises, the group’s flagship company, canceled its largest-ever secondary share sale in India last week. Requests for comment regarding the probe were not answered by SEBI or the Adani Group. Ayushmat Ltd. and Great International Tusker Fund did not reply to inquiries for comment either.
According to the sources, Elara Capital and Monarch Networth Capital, two of the ten investment banks that oversaw the share offering, are also under SEBI’s scrutiny. SEBI reportedly contacted the two companies last week.
According to one of the sources, the market regulator is looking into the positions of Elara and Monarch to make sure there isn’t “any conflict” in the share-offering procedure.
This intimate link “seems to represent an evident conflict of interest,” according to Hindenburg, who also claimed that one Adani private entity had a modest ownership share in Monarch, which had previously served as the group’s book runner. Additionally, the Mauritius-based Elara fund was accused by the short seller of having invested 99 percent of its market value in three Adani equities.
Monarch was chosen for prior share sales, according to Adani, “because of their qualifications and capacity to access the retail market.” Regarding Elara, Adani has stated that it was false to “insinuate” that the company was connected in any way to the conglomerate founders.
When contacted prior to the publication of this article, Monarch pointed Reuters to a report made on February 3 by an exchange that said that an Adani firm has owned “an small,” 0.03 percent investment in the business since 2016. According to public records, the news agency Reuters was unable to verify this.
Following the story’s publication, Monarch stated in a stock exchange filing that it had not invested in the Adani share offering prior to its cancellation and that there was “absolutely no question of any conflict of interest.”
Monarch claimed in the petition that the Reuters story “comprises half-truths that convey an erroneous picture.” Requests for information about the alleged reporting discrepancies were not answered by the company.
In response to a request for comment regarding the regulator’s investigation and Hindenburg’s claims, Elara remained silent.
meeting with the office of Modi
At a hearing on Friday, Solicitor General Tushar Mehta testified on behalf of the market regulator that SEBI is “on top of the case” in regards to investor losses that followed the publishing of the Hindenburg Research study.
Following the publication of the Reuters report on Friday, shares of Adani Enterprises fell another 5%, bringing their overall day’s losses to that point to 2.5 percent. The stock lost 4.1 percent of its value on the day.
The effect from Hindenburg’s accusations, which stood to benefit from the decline in the value of Adani Group assets, has often been brought up as a source of worry at the national level, including at Prime Minister Narendra Modi’s office, according to two government sources.
For an independent investigation on Hindenburg’s claims, opposition parties have protested in the legislature.
One of the officials claimed that SEBI, the market regulator, and the federal corporate affairs ministry, which is in charge of overseeing Indian corporations, have been in contact. Reuters was unable to ascertain the precise particulars of these discussions, which were not previously published.
The ministry began an examination of Adani’s prior financial records on February 2.
Inquiries about the regulatory investigation of Adani made after the Hindenburg report’s release were not answered by Modi’s office or the Indian Ministry of Corporate Affairs.
The company has previously claimed that Hindenburg’s accusations of stock manipulation were unfounded and the result of a lack of knowledge of Indian law. It claimed that it has always provided the essential regulatory disclosures.
From a macroeconomic standpoint, the Adani controversy was referred to be a “storm in a teacup” by India’s finance secretary T V Somanathan on Saturday.