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The Securities and Exchange Board of India (Sebi) on Thursday closed proceedings against Adani group companies, Group Chairman Gautam Adani, and associated entities facing accusations of fund diversion, violations of related-party transactions (RPTs), and fraud.
In two separate orders, the regulator exculpated the group in the matter of allegations made by short-seller Hindenburg Research in 2023, effectively bringing down curtains on the saga that had triggered a ₹12 trillion market-cap rout at the business group, then the most valuable in the country.
The regulator held transactions between Adani group companies and companies flagged by Hindenburg, including Adicorp Enterprises, Milestone Tradelinks, and Rehvar Infrastructure, could not be called RPTs. As a result, Sebi has held that other potential violations of regulatory norms around disclosures or fraud don’t stand.
“Having considered the matter holistically, I find that the allegations made against noticees are not established,” said Kamlesh Chandra Varshney, whole-time member, Sebi, while disposing of the matter without any penalty.
The key allegation was Adicorp was used as a “conduit” to channel funds within Adani group firms. Further, the regulator also probed the allegations that Adani Power and Adani Enterprises were funded by Milestone Tradelinks and Rehvar Infrastructure, through Adani Infra.
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The regulator has concluded that there has been no violation of the Listing Obligations and Disclosure Requirements (LODR) Regulations and Prohibition of Fraudulent and Unfair Trade Practices (PFUTP) Regulations raised by it in show-cause notices issued in March last year.
The Supreme Court had asked Sebi to probe the matter.
“Transparency and integrity have always defined the Adani Group. We deeply feel the pain of the investors who lost money because of this fraudulent and motivated report. Those who spread false narratives owe the nation an apology,” wrote Gautam Adani on X.
Ahead of the Hindenburg report, the combined market value of the Adani group companies was ₹19.2 trillion, and that plummeted to ₹6.8 trillion on February 27, 2023. At present, the group firms have a combined value of ₹13.6 trillion.
The Adani group firms had termed transactions with Adicorp “loan transactions” in their submissions to Sebi.
Sebi’s probe showed 66 per cent of the debit and 67 per cent of the credit transactions of Adicorp were with the Adani group. Further, if the transactions with the Adani group are removed, then the bank transactions of Adicorp show an insignificant balance. The order notes that Adicorp took loans from Adani Ports and lent money to Adani Power in 2012-13 and during 2018-19 at a higher interest rate. The company earned 20 basis points of interest from such transactions.
Sebi noted these transactions dated prior to the 2021 amendments to the RPT rules, which cannot be held retrospectively.
Further, it stated that “all the loans with interest were paid back even before the start of the investigation”.
“Any interpretation to the effect that this amendment also applies to past transactions would be a wrong and incorrect interpretation. It is clear that in this case the alleged RPTs have been reversed before coming into effect of the 2021 amendment related to loan transactions,” noted the Sebi order.
In a separate order, Sebi held there was no “one-to-one exact correlation” in transactions involving Milestone and Rehvar. Further, transactions with these entities took place between FY19 and FY23.
“The findings on this issue in the similar order passed shall apply mutatis mutandis to this case as well,” noted Sebi officials in the second order.
The regulator has emphasised the transactions entered into by related parties through unrelated parties cannot be termed as “related-party transactions” under the unamended provisions of LODR for the years under investigation.
There were allegations against the group of making incorrect disclosures and false certifications of the financial statements.
However, Sebi has held these allegations were not consequential because it has been held that the impugned transactions were not RPTs.
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