In a recent development, seven out of the ten listed companies under the Adani Group have confirmed receiving show cause notices from the Securities and Exchange Board of India (SEBI) for purportedly breaching related party transaction norms and failing to comply with listing regulations. These notifications were disclosed in regulatory filings submitted to the stock exchanges by the respective companies.
The conglomerate’s flagship firm, Adani Enterprises Ltd, along with renewable energy entity Adani Green Energy Ltd (AGEL) and city gas distributor Adani Total Gas Ltd, acknowledged receiving notices related to their parent or holding company, under the control of Chairman Gautam Adani. Similarly, ports behemoth Adani Ports & Special Economic Zone, Adani Power, electricity transmission firm Adani Energy Solutions, and commodities entity Adani Wilmar also reported receiving SEBI notices.
Despite these notices, the companies asserted that there were no substantial violations of laws or regulations and no significant adverse impact. However, except for Adani Green Energy, Adani Total Gas Ltd, and Adani Wilmar, the auditors of the other firms issued a qualified opinion on the financial statements, suggesting that the outcome of SEBI’s investigation might affect their financials in the future.
The notices stem from a probe initiated after US-based short-seller Hindenburg Research leveled serious allegations of corporate fraud and stock manipulation against the Adani Group in January 2023. Although Adani vehemently denied these accusations, the report triggered a significant stock market downturn, resulting in the group losing nearly USD 150 billion in market value at its lowest point.
In response to these allegations, the Adani Group conducted independent assessments through law firms, which concluded that none of the alleged related parties mentioned in the report were linked to the parent company or its subsidiaries. Additionally, the group asserted that it remained compliant with all relevant laws and regulations.
Following a Supreme Court order in January 2024, which directed SEBI to complete pending investigations expeditiously, the Adani Group initiated further independent reviews of the allegations to reaffirm its compliance with regulatory frameworks. However, the notices received from SEBI suggest ongoing scrutiny into certain aspects of the conglomerate’s operations.
Despite the legal challenges, most of the Adani Group’s stocks have rebounded as the conglomerate devises strategies to regain investor confidence. It’s worth noting that a show cause notice does not imply guilt but seeks explanations from entities regarding potential legal actions.
