Did SEBI find MPS violations by four Adani Group firms? What the regulator’s probe found

Mumbai: The Securities and Exchange Board of India (SEBI) has ruled that allegations of minimum public shareholding (MPS) violations against four Adani Group companies were not established, bringing to a close a probe that began in 2020.

The regulator had received complaints in June and July 2020 alleging that certain listed Adani Group companies had failed to comply with MPS requirements. SEBI subsequently issued a show-cause notice (SCN) covering alleged violations of MPS norms and the Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market (PFUTP) Regulations, 2003.

The investigation covered Adani Enterprises, Adani Power, Adani Ports and Special Economic Zone, and Adani Transmission, now known as Adani Energy Solutions.

The SCN alleged that shares held by two foreign portfolio investors (FPIs) in the four companies between 2013 and 2018 were effectively promoter holdings but had been classified as public shareholding.

In its 81-page order, SEBI said the allegations of MPS and PFUTP violations had not been established. It also found no evidence to prove that Vinod Adani, brother of Adani Group chairman Gautam Adani, controlled the two FPIs or directed their investment decisions.

SEBI said its investigation had found no evidence demonstrating Vinod Adani’s involvement in the investment decision-making process of the two FPIs.

The SCN had also alleged that Vinod Adani exercised control through his business associates Nasser Ali Shaban Ahli and Chang Chung Ling. It further alleged that the two had provided financing to four underlying investors that invested in Adani Group companies through the FPIs.

The regulator said no evidence had been produced to establish that Vinod Adani controlled Ahli or Ling, or that he therefore controlled the investment decisions of the four underlying investors.

SEBI noted that business or financial relationships alone were insufficient to establish control over the investors.

The regulator also rejected a similar allegation concerning the shareholding of Opal Investments Pvt Ltd in Adani Power.

“Since the foundational allegation of effective control over the FPIs as well as Opal has not been established, the consequential allegation relating to violation of the minimum public shareholding requirements has not been upheld,” SEBI said.

The regulator said there was no evidence that Vinod Adani had positively directed the management or policy decisions of the two FPIs. It made a similar finding regarding Opal’s investment in Adani Power.

SEBI also noted that the allegation did not concern the source of financing for investments in Adani Group companies being Vinod Adani. Had such an allegation been made and supported by evidence, the regulator said, the circumstances could have been different.

With the allegation of effective control over the FPIs and Opal not established, SEBI said the related MPS violation was also not proven. As the MPS allegation failed, the subsequent allegation under the PFUTP Regulations did not survive.

ANI