Markets regulator Securities and Exchange Board of India (Sebi) is reportedly looking into possible violation of ‘related party’ transaction rules in the Adani Group’s dealings with at least three offshore entities, which are said to have links to Adani group founder Gautam Adani’s elder brother, Vinod Adani.
A report in Reuters said that the three entities allegedly entered into several investment transactions with unlisted units of the Adani Group over the last 13 years.
The report claimed that Vinod Adani is either a beneficial owner, director or has links with these three offshore entities. Sebi is now probing whether lack of that disclosure violated ‘related party transaction’ rules.
The three offshore entities with alleged 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.
As per 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 at the bourses and require shareholder approval above a specified threshold. If such norms are violated, the involved companies can be asked to pay monetary fines.
An Adani Group spokesperson told Reuters that 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.
“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 said but did not comment on the Sebi probe into offshore entities.
Reuters reported that Vinod Adani could not be reached for comment. Besides, emails for comments sent to his holding company in Dubai, Adani Global Investment DMCC, did not receive a response. There was also no response from Krunal, Gardenia and Electrogen Infra to Reuter’s queries.
In January this year, Hindenburg in its 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.
Denying the claims, the Adani Group in its response said that all transactions it had entered into with entities who qualify as ‘related parties’ under Indian laws and accounting standards have been duly disclosed.
While the sources said that other similar transactions are also under regulatory examination, Reuter’s report mentioned that the names of other entities and their possible violation of ‘related party’ transaction rules could not be ascertained.
Hindenburg’s report eroded more than $100 billion in the value of shares in the Adani group of companies after it alleged that the conglomerate is engaged in stock manipulation and accounting fraud.
On March 2, the Supreme Court set up an expert committee to probe into the Adani Group for any lapses related to public shareholding, related party rules, or regulatory disclosures after a report by US short seller Hindenburg Research alleged stock manipulation and accounting fraud by the conglomerate.
The apex court asked the market regulator to see whether there has been a violation of Section 19 of Sebi rules and any manipulation of stock prices. But the apex court didn’t mention transactions with offshore entities.
The Reuters report said that Sebi’s investigation into Adani’s possible ‘related party’ transactions with offshore entities with links to Vinod Adani has not been reported before.
Earlier this week, Sebi chairperson Madhabi Puri Buch said that the regulator will not comment on it as the matter is sub-judice.
“We never comment on entity-specific matters and on top of that, the matter is before the Supreme Court. We never comment on sub-judice matters,” said Sebi chairperson Buch.
While Sebi investigations are continuing, top regulatory officials are due to give a status report to a court-appointed panel on Sunday, the two sources told Reuters on condition of anonymity as the investigations are private.
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