India’s market regulator has increased scrutiny of deals by the Adani Group over the past year and will study a report issued by short-seller Hindenburg Research to add to its own ongoing preliminary investigation into the group’s foreign portfolio investors, according to two sources aware of the matter.

On Wednesday, the US short-seller said it held short positions in the Indian conglomerate, accusing it of improper use of offshore tax havens and flagging concerns about high debt, leading to a massive sell-off of India-listed shares of 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. The Securities and Exchange Board of India (Sebi) has been increasingly asking for disclosures that it ordinarily does not.

Adani earlier this week dismissed the Hindenburg report as baseless and said it is considering whether to take legal action against the New York-based firm.

Sebi spokespersons did not offer any immediate comments saying they do not discuss company specific matters and ongoing probes.

In the case of Adani Group’s acquisition of Switzerland-based Holcim’s stake in India’s Ambuja Cements and ACC, the regulator examined the offshore special purpose vehicle (SPV) used for the transaction, the first source said.

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The use of this SPV was disclosed by the group as part of the acquisition announcement in May 2022. The regulator had found as many as 17 foreign offshore entities involved in the funding of the transaction.

The regulator had sought clarity from the group on these entities when the group approached it for regulatory clearance last year. These responses are under regulatory examination, sources said.

Hindenburg’s report on the Adani group comes amid a US$2.45 billion secondary share sale by the group’s flagship company Adani Enterprises. On Friday, shares of Adani Enterprises fell below the price at which shares are being offered as part of the issue.

In July, the regulator had initiated a probe of little-known offshore funds based out of Mauritius which had large holdings in Adani’s Group’s listed companies, which potentially raised concerns about stock price manipulation.

At the time, the regulator’s investigation hit a wall due to lack of information from jurisdictions where these funds were domiciled.

Some issues raised in the Hindenburg report point to concerns similar to what the regulator had regarding movement of funds between parties related to the Adani Group through offshore funds back into local companies, sources said. REUTERS