New Delhi: The Securities and Exchange Board of India (SEBI) has turned down attempts by a number of foreign investment funds associated with the Adani Group to settle charges of market manipulation and favourable treatment to insiders. A ruling that leaves the investigation into the resources in question open for an extended period, and further regulatory scrutiny of the group’s offshore shareholding model.
What is the case about?
The investigation is in 2020. SEBI is looking into the matter whether the 13 overseas portfolio investors were independent public shareholders or were linked to or acting as representatives of the founders of the Adani Group.
This is crucial because the public shareholding criteria in the Indian Stock Market stipulates that listed companies keep a minimum percentage of public shares. There is also a new provision that requires investors to be transparent about the owners or controllers of investment funds.
The amount in question had been invested in a few companies of the Adani Group at various stages, with substantial stakes.
Why did SEBI reject the settlement bids?
The money came close to the Securities & Exchange Board of India (SEBI) under the settlement mechanism to try to avoid a lengthy enforcement process, reports said. But SEBI had informed the representatives of the funds that the terms they had proposed don’t comply with the regulator’s expectations.
According to the reports, SEBI had requested more details regarding the funds, including details on the ownership and operations of the funds. The regulator also wanted financial penalties such as repayment of the profits that might be connected to any regulatory violations.
The suggestions offered by the funds were thus viewed as inadequate to resolve the issue. With the settlement applications rejected, the investigation can continue.
What does this mean for Adani Group?
The rejection does not imply any wrongdoing on the part of the Adani Group nor the funds. That indicates that the proposed settlement was refused and the regulatory issue is unresolved. In the past, the Adani Group has ruled out any wrongdoing and have stated that their settlement applications were precautionary and a denial of the allegations.
The recent move highlights SEBI’s ongoing efforts to keep a check on the transparency, ownership disclosure and compliance of foreign investors in large Indian companies, which is significant for investors. The subsequent investigation will be closely monitored, especially if any information emerges about the “real” ownership and function of the 13 funds.
