India’s markets watchdog has “hit a wall” in its investigation of offshore shareholders in tycoon Gautam Adani’s company, a committee convened by India’s Supreme Court said.
India’s securities regulator, the Securities and Exchange Board of India, began investigating offshore entities holding shares in Adani in 2020, but the scrutiny of those entities has increased this year after U.S. short-seller Hindenburg Research accused Adani of price manipulation and fraud. increase.
A Supreme Court-appointed panel of lawyers, former bankers and business executives has been ordered to examine whether regulators have failed to detect any possible wrongdoing by Adani after Adani strongly denied the allegations.
According to an interim report by the commission (a copy of which was seen by the FT), Sebi has left “blank” in its investigation of 13 offshore entities it deems suspicious.
The 173-page report, which extensively cited briefings provided by Sebi, said it could not yet conclude any regulatory failures, adding that Sebi had not identified any pattern of share price manipulation.
According to Hindenburg Research, “offshore shell companies and funds associated with the Adani Group constitute many of the largest ‘public’ (…) holders of Adani shares”. Under stock exchange rules, at least 25 percent of a public company’s shares must be held by investors unrelated to the group.
“Sebi has long been suspicious of some public shareholders… . . . ” the committee’s report said, adding that “the ultimate chain of ownership above the 13 overseas entities holding shares in Adani Group is unclear”.
Neither Adani nor the regulator immediately responded to a request for comment on the report.
Sebi has sought the help of law enforcement agencies and regulators in seven jurisdictions as part of the investigation, the report added.
The Supreme Court gave Sebi until mid-August to complete the investigation, extending a two-month deadline given in March. Sebi’s probe will also examine Hindenburg’s allegations of possible stock price manipulation and breach of related party trading rules.
Tracking down the identities of offshore shareholders “could be a journey without destination” for Sebi, the report said, describing it as a “daunting task”.
Claims by New York-based short-seller Hindenburg at one point wiped $150 billion off the total market value of Adani’s listed company and forced the group to walk away from a $2.4 billion share sale.
Shares in the Adani Group have since pared some of their losses, with the billionaire’s flagship Adani Enterprises up nearly 4% on Friday.
The report also said international banks, including Goldman Sachs and JPMorgan Chase & Co, had rejected the committee’s call to make recommendations on cross-border deals, with some citing “conflicts of interest due to commercial ties to the Adani Group”.
JPMorgan declined to comment, and Goldman Sachs did not immediately respond to a request for comment.