SEBI closes Adani MPS probe, finds no violation by four group firms
SEBI has ruled that allegations of minimum public shareholding violations against four Adani Group companies were not established, closing a probe begun in 2020.
The Securities and Exchange Board of India has concluded that allegations of minimum public shareholding (MPS) violations against four Adani Group companies could not be established, bringing to a close an investigation that began in 2020.
The matter dates back to complaints received by the regulator in June and July 2020, which alleged that certain listed Adani group companies had failed to meet MPS requirements. A show cause notice followed, accusing the companies of breaching both MPS norms and the Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market Regulations, 2003.
At the heart of the notice was the claim that shares held by two foreign portfolio investors in Adani Enterprises, Adani Power, Adani Ports and SEZ, and Adani Transmission (now Adani Energy Solutions) between 2013 and 2018 were in substance promoter holdings, but had been presented as public shareholding.
In an 81-page order, the regulator held that the allegations contained in the show cause notice had not been established. It also found no evidence that Vinod Adani, brother of Group Chairman Gautam Adani, controlled the two FPIs.
The order stated that there was nothing to demonstrate Vinod Adani's involvement in the investment decisions of the two foreign portfolio investors in the group companies, and that the investigation had not been able to prove he controlled those decisions.
The show cause notice had further alleged that Vinod Adani exercised control through his business associates Nasser Ali Shaban Ahli and Chang Chung Ling, and that the two had provided financing to four underlying investors who invested in Adani Group companies through the two FPIs. SEBI said no evidence was produced to show that Vinod Adani controlled Ahli or Ling, or through them the investment decisions of the four underlying investors. It observed that a mere business or financial relationship cannot lead to the conclusion that one person controls all others, warning that such a finding would have unintended consequences for the implementation of securities laws in the capital market.
A similar allegation concerning Opal Investments Pvt Ltd's shareholding in Adani Power was also rejected.
With the foundational charge of effective control over the FPIs and Opal not established, the regulator said the consequential allegation of MPS violation did not hold. The related allegations of fraudulent and unfair trade practices were dropped as well.