© Reuters. FILE PHOTO: Birds rest on the logo of the Securities and Exchange Board of India (SEBI), India’s market regulator, installed on the facade of its headquarters building in Mumbai, India, July 13, 2015. REUTERS/Shailesh Andrade
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By Jayshree P Upadhyay, Sarita Chaganti Singh and Devjyot Ghoshal
MUMBAI/NEW DELHI (Reuters) – India’s market regulator is investigating Adani Group’s links to some of the investors in the conglomerate’s aborted $2.5 billion share sale, two sources said, amid growing concern. in New Delhi over allegations by an American short seller against one of the country’s major industrial groups.
The Securities and Exchange Board of India (SEBI) is investigating any possible violation of Indian securities laws or any conflict of interest in the share sale process, the two sources with direct knowledge of the matter said.
The watchdog is investigating relations between Adani and at least two Mauritius-based companies, Great International Tusker Fund and Ayushmat Ltd., which participated as lead investors, among others, said the sources, who spoke on condition of anonymity due to the confidential nature of the investigation.
As per India’s capital and disclosure requirements rules, any entity related to a company founder or founding group is not eligible to apply in the anchor investor category. One of the sources said the focus of the investigation would be whether any of the lead investors are “connected” to the founding group.
The port-powered conglomerate, controlled by billionaire Gautam Adani, one of the world’s richest people, has seen shares of his seven companies lose more than $100 billion in market value since the January 24 report. from Hindenburg Research, which accused the misuse of offshore tax havens and stock market manipulation. Adani has denied the charges. Last week, the group’s flagship entity, Adani Enterprises, withdrew its secondary share offering, the largest ever in India, due to heavy sell-off.
SEBI and the Adani Group did not respond to requests for comment on the investigation. Great International Tusker Fund and Ayushmat Ltd. also did not respond to requests for comment.
Also under the SEBI scanner are Elara Capital and Monarch Networth Capital, two of the 10 investment banks that managed the share offering, the sources said, adding that SEBI had approached the two companies last week.
The market regulator is examining the roles of Elara and Monarch to rule out “any conflict” in the share offering process, one of the sources said.
Shares of Adani Enterprises extended their losses to 5% in trading on Friday afternoon following the Reuters report, having previously fallen 2.5% earlier in the day.
MEETING WITH THE MODI OFFICE
Hindenburg has alleged that a private entity of Adani had a small ownership stake in Monarch, who previously worked as a book broker for the group, saying “this close relationship seems to pose an obvious conflict of interest.” The short seller also alleged that a Mauritius-based Elara fund has invested 99% of its market value in three Adani shares.
Adani has said that Monarch was selected for previous stock sales “because of its credentials and ability to access the retail market.” Regarding Elara, Adani has said that “insinuations” that the company was somehow related to the conglomerate’s founders were incorrect.
When contacted, Monarch referred Reuters to an exchange disclosure on February 3 that said an Adani entity had an “insignificant” stake, 0.03%, in the company since 2016. Reuters was unable to confirm this from records. public. Elara did not respond to a request for comment on the regulator’s investigation and Hindenburg’s allegations.
In recent days, the fallout from the allegations by Hindenburg, who purported to profit from the falling value of the Adani Group’s assets, has repeatedly been raised as a matter of national concern, including in the office of Prime Minister Narendra Modi, two government officials said.
Opposition parties have protested in parliament to call for an independent inquiry into Hindenburg’s allegations.
The federal ministry for corporate affairs, responsible for regulating Indian companies, has briefed officials in Modi’s office and contacted SEBI, the market regulator, one of the officials said. Reuters was unable to determine the specific details of these discussions, which have not been previously reported.
The ministry launched a review of Adani’s previous financial statements on February 2.
Modi’s office and India’s Ministry of Corporate Affairs did not respond to requests for comment on Adani’s regulatory investigation after the publication of the Hindenburg report.
The conglomerate previously said Hindenburg’s accusations of stock manipulation were “baseless” and stemmed from ignorance of Indian law. He has said that he has always made the necessary regulatory disclosures. India’s Finance Secretary TV Somanathan on Saturday described Adani’s problem as a “storm in a cup of tea” from a macroeconomic perspective.