Daily Management Review

Scrutiny Of Adani Group To Be Increased By India Market Regulator


According to two sources familiar with the matter, India's market regulator has increased its scrutiny of Adani Group transactions in the last year and will study a report issued by short-seller Hindenburg Research to supplement its own ongoing preliminary investigation into the group's foreign portfolio investors.
On Wednesday, the US short-seller disclosed that it held short positions in the Indian conglomerate, accusing it of improper use of offshore tax havens and raising concerns about the conglomerate's high debt, prompting a massive sell-off of India-listed shares in the conglomerate's companies.
“SEBI has been increasingly examining all the transactions that Adani Group has been undertaking in the listed space," said the first of the two sources, who declined to be identified as the matter is confidential. SEBI has been increasingly asking for disclosures that it ordinarily does not.
There were no comments on the issue from the Adani Group.
No comments were also available from SEBI.
Adani earlier this week dismissed the Hindenburg report as unfounded and stated that it is considering legal action against the New York-based firm.
The regulator examined the offshore special purpose vehicle (SPV) used for the transaction in the case of Adani Group's acquisition of Switzerland-based Holcim Ltd's stake in India's Ambuja Cements Ltd and ACC Ltd, according to the first source.
The group disclosed the use of this SPV as part of the acquisition announcement in May 2022. The regulator discovered up to 17 foreign offshore entities involved in the transaction's funding.
When the group approached the regulator for regulatory clearance last year, the regulator sought clarification from the group on these entities.
According to sources, these responses are being scrutinized by regulators.
Hindenburg's report on the Adani group comes on the heels of Adani Enterprises' $2.45 billion secondary share sale. Adani Enterprises' shares fell below the price at which they are being offered as part of the issue on Friday.
In July, the regulator launched an investigation into little-known offshore funds based in Mauritius that had large holdings in Adani Group's listed companies, raising concerns about stock price manipulation.
The regulator's investigation was stalled at the time due to a lack of information from the jurisdictions where these funds were domiciled.
According to sources, some of the issues raised in the Hindenburg report are similar to the regulator's concerns about the movement of funds between parties related to the Adani Group through offshore funds back into local companies.