What is Sebi probing in Adani-Hindenburg issue?

The Supreme Court (SC) on Wednesday directed the market regulator Securities and Exchange Board of India (Sebi) to complete its investigation into the two pending matters related to the Adani Group in three months.

The two investigations, which are at the interim stage are based on the allegations of violating minimum public shareholding (MPS) regulations involving overseas entities while the other pertains to the examination of trades before and after the release of the Hindenburg Report, according to the status report, which Sebi submitted to the SC in August last year.

In the alleged violation of MPS Regulation, Sebi submitted that it had sought details from five foreign jurisdictions on the foreign portfolio investors' (FPIs) holdings in the firm.  Sebi stated that establishing the economic interest of 12 FPIs remained a challenge as they are located in tax haven jurisdictions.

These FPIs were classified as public shareholders of the Adani group firms. Under the Sebi regulations, a listed firm is mandated to keep at least 25 per cent stake as public shareholding and the promoter holding is capped at 75 per cent. Hindenburg had alleged circumvention of this norm through FPIs.

The market regulator said that it had sent around 90 communications to overseas agencies seeking assistance. 

For the second pending investigation, Sebi stated that it had sent three communications to external agencies seeking assistance and that the information was awaited. 

Sebi is trying to ascertain if the short positions of certain entities in the Adani Group were unusual around the time when the US-based firm released its report.  

In August 2023, Sebi submitted a status report to the apex court stating that it had concluded investigations in 22 of the 24 matters related to the allegations against Adani Group.

Of the 22 investigations concluded, 13 are on alleged failure to disclose related party transactions, two on the allegations of manipulating stock prices, five on possible insider trading allegations, and one each connected to FPI regulations and takeover regulations.