INDIA’S market regulator will brief the federal government on its investigation into Adani Group’s shelved share sale, said two sources, in the same week that its laws will also face scrutiny by the country’s top court.

Led by billionaire businessman Gautam Adani, the group’s seven listed stocks have lost more than US$100 billion in market value since Hindenburg Research accused it of improper offshore tax-haven use and stock manipulation. The company has denied the short seller’s allegations; a company spokesperson told Reuters that the report was “baseless” and “speculative”, without elaborating.

The fallout continued on Monday (Feb 13), with shares of the conglomerate’s listed companies extending their losses. Adani Enterprises fell 3 per cent; Adani Total Gas, Adani Power and Adani Transmission lost 5 per cent each.

In total, since the Hindenburg report was published on Jan 24, Adani Enterprises has slipped 50 per cent, while Adani Total Gas, a joint venture with France’s TotalEnergies, has plunged 70 per cent.

The saga has sparked worries of financial contagion in India. It also led to protests in parliament, where lawmakers demanded an investigation, and ratings-outlook downgrades of some Adani Group units.

All of this has cast a shadow on Adani Group’s capital-raising plans. Bloomberg News reported earlier on Monday that the conglomerate has halved its revenue growth target and plans to scale down fresh capital expenditure.

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Reuters previously reported that the Securities and Exchange Board of India (SEBI) was probing the group’s market rout. The investigation included an examination of trade patterns and potential irregularities in the US$2.5 billion share sale of flagship company Adani Enterprises. The group was forced to cancel the share sale as its stock plunged.

Two sources said that the board of SEBI would be updating finance ministry officials about the probe on Feb 15. They spoke on the condition of anonymity as they were not allowed to speak to the media.

SEBI and the finance ministry did not respond immediately to Reuters’ requests for comment.

On Monday, India’s Supreme Court is set to resume its hearing on public-interest petitions that raised concerns about steep investor losses sparked by Hindenburg’s report. The court has asked the market regulator to explain its regulatory frameworks and how such losses could be prevented in the future.

Last week, Moody’s downgraded its ratings outlook for some Adani Group companies, while index provider MSCI said it would cut the weightings of some units in its stock indexes.

Adani Group said it was considering an independent evaluation of issues relating to legal compliance, related party transactions and internal controls.

Concerns have also risen about the exposure of Indian and foreign lenders to Adani Group. In its rebuttal against Hindenburg’s allegations, the conglomerate pointed to its international banking relationships as a sign of its strength.

DBS Group on Monday said it had a S$1.3 billion exposure to Adani Group’s companies, with S$1 billion of this to finance its cement business. The lender is among a group of banks that has provided financing to the conglomerate’s units. DBS chief executive Piyush Gupta said the bank was “not concerned” about its exposure to the group; he added that the cement business, which Adani Group acquired for US$10.5 billion last year, was “solid, (and) cash-generating”. REUTERS