NEW DELHI: The Securities and Exchange Board of India (Sebi), which is investigating the Hindenburg Report’s allegation that the Adani Group allegedly manipulated share prices by exploiting loopholes in Minimum Public Shareholding (MPS) norms have taken advantage of, has communicated this supreme court that it had been investigating this issue since October 2020, but clarified that its 2016 investigation into the issuance of Global Depository Receipts (GDRs) by 51 listed Indian companies was unrelated Adani group companies.
In a supplemental affidavit filed Monday, market regulator Sebi said: “In connection with the investigation of MPS standards, Sebi has already entered into a multilateral Memorandum of Understanding (MMoU) with the International Organization of Securities Commissions (IOSCO). contacted eleven foreign regulatory authorities.” Various requests for information were sent to these supervisory authorities. The first request to foreign regulators was made on October 6, 2020.”
Sebi said that the petitioners are confusing this MPS investigation with the previous investigation into the issuance of GDRs by 51 Indian companies and claim that Sebi failed to contact IOSCO, even though IOSCO had been investigating the issue since 2016.
The regulator said: “Appropriate enforcement action has been taken following the completion of the (DDR) investigations. Therefore, the claim that Sebi has been investigating Adani since 2016 is factually unfounded. The trust that one wanted to place in the investigation of the GDR is completely misplaced.”
Sebi said it submitted a detailed note to the SC-appointed panel of experts, led by Justice Am Sapredetailing the steps taken, responses received and the status of intelligence gathering under the MMoU under IOSCO.
Referring to the investigations into 12 transactions referenced in the Hindenburg Report, Sebi said, “These transactions are extremely complex, involving many transactions in multiple jurisdictions. A thorough investigation of these transactions would require the compilation of several domestic and international banks and financial reports from onshore and offshore companies involved in the transactions and contracts, if any, intercompany agreements together with other supporting documents.”
“After that, an analysis of the documents obtained from various sources would have to be carried out before conclusive results can be reached,” Sebi justified his request for an extension of the deadline for the completion of the investigation by another six months.
In 2010, Sebi changed the MPS norms to require all listed companies to hold at least 25% of their post-issuance paid-up share capital in public hands, up from 10% previously. Companies have been given three years after the listing to comply with the new regulations.
The Hindenburg Report suggested that proponents who exploit existing loopholes may still be able to pass a special resolution without public support. Significant opacity has been alleged about certain public shareholders of Adani companies, particularly Mauritius-based funds, which have been reported as public funds even when controlled by the Adani group.
The report claimed that through these means, the Adani Group was able to manipulate stock prices while maintaining a controlling stake of over 75% in its companies. In its response to the Hindenburg report, the Adani Group had denied any connection to offshore funds and said it had no control over the public trading of its shares on the stock exchange.
In a supplemental affidavit filed Monday, market regulator Sebi said: “In connection with the investigation of MPS standards, Sebi has already entered into a multilateral Memorandum of Understanding (MMoU) with the International Organization of Securities Commissions (IOSCO). contacted eleven foreign regulatory authorities.” Various requests for information were sent to these supervisory authorities. The first request to foreign regulators was made on October 6, 2020.”
Sebi said that the petitioners are confusing this MPS investigation with the previous investigation into the issuance of GDRs by 51 Indian companies and claim that Sebi failed to contact IOSCO, even though IOSCO had been investigating the issue since 2016.
The regulator said: “Appropriate enforcement action has been taken following the completion of the (DDR) investigations. Therefore, the claim that Sebi has been investigating Adani since 2016 is factually unfounded. The trust that one wanted to place in the investigation of the GDR is completely misplaced.”
Sebi said it submitted a detailed note to the SC-appointed panel of experts, led by Justice Am Sapredetailing the steps taken, responses received and the status of intelligence gathering under the MMoU under IOSCO.
Referring to the investigations into 12 transactions referenced in the Hindenburg Report, Sebi said, “These transactions are extremely complex, involving many transactions in multiple jurisdictions. A thorough investigation of these transactions would require the compilation of several domestic and international banks and financial reports from onshore and offshore companies involved in the transactions and contracts, if any, intercompany agreements together with other supporting documents.”
“After that, an analysis of the documents obtained from various sources would have to be carried out before conclusive results can be reached,” Sebi justified his request for an extension of the deadline for the completion of the investigation by another six months.
In 2010, Sebi changed the MPS norms to require all listed companies to hold at least 25% of their post-issuance paid-up share capital in public hands, up from 10% previously. Companies have been given three years after the listing to comply with the new regulations.
The Hindenburg Report suggested that proponents who exploit existing loopholes may still be able to pass a special resolution without public support. Significant opacity has been alleged about certain public shareholders of Adani companies, particularly Mauritius-based funds, which have been reported as public funds even when controlled by the Adani group.
The report claimed that through these means, the Adani Group was able to manipulate stock prices while maintaining a controlling stake of over 75% in its companies. In its response to the Hindenburg report, the Adani Group had denied any connection to offshore funds and said it had no control over the public trading of its shares on the stock exchange.
