Adani-Hindenburg Row: SEBI Probe Comes To End As Regulator Tightens Disclosure For Big Firms

An expert panel appointed by SC in May said the SEBI had “drawn a blank” in its investigation into 13 overseas entities alleged to be fronts for Adani companies

The SEBI earlier told the Supreme Court it has continuously tightened rules concerning so-called beneficial ownership and related-party transactions, key aspects of a hearing into whether Adani Group manipulated its stock price.

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The reports from a nearly three year probe by SEBI into Adani Group are finally expected to land at the desk of the Supreme Court on Monday, news agency Bloomberg said. According to the report, several observers are expecting minor, if any, red marks against Adani Group after an expert panel appointed by top court in May said the Securities and Exchange Board of India had “drawn a blank” in its investigation into 13 overseas entities alleged to be fronts for Adani companies.

The panel accused the SEBI of having diluted rules that would have helped break through so-called opaque structures and the regulator’s job is made harder by India’s overlapping web of corporate laws that offer loopholes large businesses often exploit.

The market regulator had sought more time to complete the probe, but the court, amid a slump in Adani shares following a damaging report published in January by US shortseller Hindenburg Research, imposed an August 14 deadline.

“I am not confident that SEBI will file a robust case,” said Bhaskar Chakravorti, dean of global business at The Fletcher School at Tufts University. Adani Group “will mostly escape serious negative impact and over time build back up unless the Supreme Court and the regulators do something dramatically different,” he added.

The SEBI began looking at offshore investments into Adani’s ports, power and infrastructure empire in October 2020. The heart of the matter is whether Adani used companies registered abroad to conduct business and pump up his share prices without properly disclosing affiliations. Adani has repeatedly denied wrongdoing and said it has made all required disclosures.

Hindenburg’s broadside, more than two years later, reiterated the allegations and heaped pressure on the regulator to hasten the probe.

The regulator has previously told the Supreme Court it has continuously tightened rules concerning so-called beneficial ownership and related-party transactions, key aspects of a hearing into whether Adani Group manipulated its stock price.

Meanwhile, before resigning as an auditor of an Adani Group firm, Deloitte had sought an independent external examination of allegations made by a US short-seller but the company said the allegations had no effect on financial statements and the reasons cited for quitting were not convincing to warrant such a move.

In a 163-page filing with stock exchanges relating to Deloitte Haskins & Sells LLP's resignation, Adani Ports and Special Economic Zone (APSEZ) said that in meetings with its leadership, Deloitte indicated concern over a lack of a wider audit role as auditors of other listed Adani companies. However, the firm conveyed to the auditor that it was not within its remit to recommend such appointments as other entities are "completely independent".

"The Audit Committee (of APSEZ) was of the view that the grounds advanced by Deloitte for resignation as Statutory Auditor were not convincing or sufficient to warrant such a move," said Gopal Krishna Pillai, former union home secretary and chairman of the Audit Committee of APSEZ, in a statement.