Adani Group probe over MPS norms on since October 2020: Sebi to SC

NEW DELHI: The Securities and Exchange Board of India (Sebi), investigating the Hindenburg report’s accusation that the Adani Group allegedly manipulated share prices by exploiting loopholes in the ‘minimum public shareholding’ (MPS) norms, has informed the Supreme Court that it has been probing this issue since October 2020 but clarified that its 2016 probe into issuance of global depository receipts (GDRs) by 51 Indian listed companies was unconnected to the Adani Group companies.

In a supplementary affidavit filed on Monday, market regulator Sebi said, “In the context of investigation into MPS norms, Sebi has already approached 11 overseas regulators under the multilateral memorandum of understanding (MMoU) with the International Organization of Securities Commissions (IOSCO). Various requests for information were made to these regulators. The first request to overseas regulators was made on October 6, 2020.”

Sebi said the petitioners are mixing this MPS investigation with the earlier probe into the issuance of GDRs by 51 Indian entities to claim that Sebi had failed to approach the IOSCO though it had been probing the issue since 2016.

The regulator said, “Pursuant to completion of (GDRs) investigations, appropriate enforcement actions were taken. Hence, the allegation that Sebi has been investigating Adani since 2016 is factually baseless. The reliance sought to be placed on the investigation pertaining to GDRs is wholly misplaced.”

Sebi said it has submitted a detailed note to the SC-appointed expert panel, headed by Justice A M Sapre, covering the steps taken, responses received and the status of information gathering under the MMoU under IOSCO.

On the investigations into 12 transactions referred in the Hindenburg report, Sebi said, “These transactions are highly complex and have many transactions across numerous jurisdictions and a rigorous investigation of these transactions would require collation from multiple domestic as well as international banks, financial statements of onshore and offshore entities involved in the transactions and contracts agreements, if any, entered between entities along with other supporting documents.”

“Thereafter, analysis would have to be conducted on the documents received from various sources before conclusive findings can be arrived at,” Sebi said, justifying its request for extension of time for completion of the investigation by another six months.

In 2010, Sebi had changed the MPS norms to require all listed companies to maintain at least 25%, as against 10% earlier, of their post-issue paid-up share capital in public hands. The companies were given three years following listing to comply with the new rules.

The Hindenburg report suggested that promoters, exploiting existing loopholes, may still be able to pass a special resolution without public support. It had alleged considerable opacity in certain public shareholders of Adani companies, especially Mauritius-based funds which were shown as public funds even when these were controlled by the Adani Group.

The report had alleged that using these funds, the Adani Group was able to manipulate share prices while retaining a controlling stake of over 75% in their companies. In its response to the Hindenburg report, the Adani Group had denied any connection with offshore funds and said they had no control over public trading of their shares in stock market.

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