Indian market regulator probes Adani’s links to investors
INDIA’S market regulator is investigating Adani Group’s links to some of the investors in its aborted US$2.5 billion share sale, two sources said, amid growing concern in New Delhi over a US short-seller’s allegations against the conglomerate.
The Securities and Exchange Board of India (Sebi) is looking into potential violations of Indian securities laws, or any conflicts of interest in the share-sale process, said the sources, who have direct knowledge of the matter.
They added that the watchdog was investigating relationships between Adani and at least two Mauritius-based companies – Great International Tusker Fund and Ayushmat – which participated as anchor investors, among others. The sources requested anonymity due to the confidential nature of the probe.
Under India’s capital and disclosure requirement rules, any entity related to a company’s founder, or the founder group, is ineligible to apply under the anchor investor category. One of the sources said the focus of the probe would be whether any of the anchor investors were “connected” to the founder group.
The shares of the seven companies in the ports-to-energy conglomerate – controlled by billionaire Gautam Adani, one of the world’s richest people – have lost more than US$100 billion in market value since Jan 24. That was when activist short-seller Hindenburg Research released a report accusing the group of improper use of offshore tax havens and stock manipulation. Adani has denied the charges.
Last week, the group’s flagship entity, Adani Enterprises, pulled its secondary share offering – India’s largest – because of the sharp sell-off.
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Sebi and the Adani Group did not respond to requests for comments about the investigation. Great International Tusker Fund and Ayushmat also did not respond to requests for comments.
Also on the regulator’s radar are Elara Capital and Monarch Networth Capital, two of the 10 investment banks that managed the share offering, said the sources. They added that Sebi approached the two companies last week.
The businesses’ roles were being examined by the market watchdog to rule out “any conflict” in the share-offering process, one of the sources said.
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Hindenburg has alleged that one Adani private entity had a small ownership stake in Monarch, which previously worked as a book runner for the group. The short-seller said that “this close relationship seems to pose an obvious conflict of interest”.
It also alleged that a Mauritius-based fund of Elara had invested 99 per cent of its market value in three Adani stocks.
Adani said that Monarch was selected for previous share sales “for (its) credentials and ability to tap into the retail market”. It also said that any “innuendos” that Elara was in any manner related to the conglomerate founders were incorrect.
When contacted, Monarch referred Reuters to an exchange disclosure on Feb 3 that said an Adani entity has held an “insignificant” stake of 0.03 per cent in the company since 2016. Reuters was unable to confirm this from public records.
Elara did not respond to requests for comments on Sebi’s probe and Hindenburg’s allegations.
In recent days, the fallout of the report by Hindenburg, which stood to profit from the fall in the value of Adani Group assets, has come up repeatedly as a cause for concern at the national level – including at Prime Minister Narendra Modi’s office, two government officials said.
Opposition parties have protested in parliament to call for an independent probe into Hindenburg’s allegations.
The federal corporate affairs ministry, responsible for regulating Indian businesses, has briefed officials in Modi’s office and been in touch with Sebi, one of the officials said. Reuters could not determine the specifics of these discussions, which have not been previously reported.
The ministry launched a review of Adani’s past financial statements on Feb 2.
Modi’s office and the Ministry of Corporate Affairs did not respond to requests for comments on the regulatory probe into Adani.
The conglomerate said that Hindenburg’s allegations of stock manipulation had “no basis” and stemmed from an ignorance of Indian law. It added that it has always made the necessary regulatory disclosures.
India’s Finance Secretary, T V Somanathan, described the Adani issue as a “storm in a teacup” from a macroeconomic perspective. REUTERS
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