The market regulator is looking into any potential violations of securities laws or any conflicts of interest in the process of selling the shares, the two sources with direct knowledge of the matter said.
The watchdog is investigating Adani’s dealings with at least two Mauritius-based firms – Great International Tusker Fund and Ayushmat – who participated as anchor investors, among others, the sources said, who spoke on condition of anonymity due to the confidential nature of the probe.
Under the capital requirements and disclosure rules, any entity related to a company founder or group of founders is ineligible to apply in the anchor investor category. One of the sources said the focus of the investigation would be whether any of the core investors are “connected” to the founding group.
The ports-to-energy conglomerate — controlled by billionaire Gautam Adani, one of the richest people in the world — has seen shares of its seven companies lose more than $100 billion in market value since Hindenburg Research’s Jan. 24 report, who accused him of misusing offshore tax havens and manipulating stocks. Adani denied the allegations. Last week, the group’s flagship entity, Adani Enterprises, withdrew its secondary equity offering, the largest ever in India, amid the sharp selloff.
Sebi and the Adani Group did not respond to requests for comment on the investigation. Great International Tusker Fund and Ayushmat also did not respond to requests for comment.
Also under Sebi’s scanner are Elara Capital and Monarch Networth Capital, two of the 10 investment banks that handled the stock offering, the sources said, adding that SEBI had approached the two companies last week.
The roles of Elara and Monarch are being reviewed by the market watchdog 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 Friday afternoon trade after the Reuters report, after previously trading down 2.5% earlier in the day.
Meeting with PMO
Hindenburg said private entity Adani had a small ownership stake in Monarch – which previously served as bookrunner for the group – saying “this close relationship appears to pose a clear conflict of interest.” The short seller also said that a Mauritius-based Elara fund has invested 99% of its market value in three Adani shares.
Adani said Monarch was selected for previous stock sales “because of its credentials and ability to tap into the retail market.” On Elara, Adani said “insinuations” that the firm was somehow connected to the conglomerate’s founders were incorrect.
When contacted, Monarch told Reuters of a trading disclosure on Feb. 3 that an Adani entity held “an insignificant stake,” equal to 0.03%, in the company since 2016. Reuters was unable to confirm this from public records. Elara did not respond to a request for comment on the regulator’s investigation and Hindenburg’s allegations.
In recent days, the fallout from Hindenburg’s accusations that he allegedly took advantage of the fall in the value of the Adani Group’s assets has repeatedly caused concern at the national level, including in Prime Minister Narendra Modi’s office, two officials said of the government.
Opposition parties protested in parliament demanding an independent investigation into Hindenburg’s allegations.
The corporate affairs ministry, which is responsible for regulating Indian businesses, notified officials in Modi’s office and has been in contact with Sebi, the market regulator, one of the officials said. Reuters could not determine the specific details of these discussions, which have not previously been reported.
The ministry began a review of Adani’s past accounts on 2 February.
Modi’s office and the corporate affairs ministry did not respond to requests for comment on the regulatory probe into Adani following the release of the Hindenburg report.
The conglomerate has previously said that Hindenburg’s stock manipulation allegations “had no basis” and stemmed from ignorance of Indian law. He said he always provided the necessary regulatory information. TV Finance Secretary Somanathan on Saturday described the Adani issue as a “storm in a teacup” from a macroeconomic perspective.
