SEBI Issues Show Cause Notices to Seven Adani Group Companies for Regulatory Violations In Fiscal Year 2024
In the fiscal year 2024, seven out of the ten listed companies of the Adani Group were issued show cause notices by the Securities and Exchange Board of India (SEBI). These notices, which were issued during the fourth quarter stated violations including non-compliance with listing agreements and related party transaction norms. Despite these allegations, the companies reported that...
In the fiscal year 2024, seven out of the ten listed companies of the Adani Group were issued show cause notices by the Securities and Exchange Board of India (SEBI). These notices, which were issued during the fourth quarter stated violations including non-compliance with listing agreements and related party transaction norms. Despite these allegations, the companies reported that the notices had no significant impact on their financial statements.
The affected companies include Adani Enterprises, Adani Green Energy, Adani Power, Adani Energy Solutions, Adani Total Gas, Adani Wilmar, and Adani Ports and Logistics. Each company made individual announcements to the stock exchanges, disclosing the receipt of these notices.
Adani Enterprises received two show cause notices related to non-compliance with the Listing Agreement and SEBI's Listing Obligations and Disclosure Requirements (LODR) Regulations. These notices pertained to certain transactions with third parties and the validity of peer review certificates of statutory auditors.
Adani Green Energy was also among the companies that received SEBI's scrutiny. It acknowledged receiving a notice regarding the validity of a Peer Review Certificate (PRC) of one of its joint auditors, an issue it has since addressed.
This regulatory scrutiny of the Adani Group is set against the backdrop of a significant investigation initiated by a report from US-based short-seller Hindenburg Research in January 2023. The report accused the Adani Group of stock manipulation and accounting fraud. These allegations, which the Adani Group has vehemently denied, led to a significant decline in the group's market value, with stocks plummeting by about 65% in the weeks following the report's publication.
In response to the Hindenburg report, several petitions were filed in the Supreme Court, calling for an independent investigation into the allegations. Subsequently, in March 2023, the Supreme Court established an expert committee led by former judge Justice A.M. Sapre to investigate potential regulatory failures concerning the Adani Group. By August 2023, SEBI had completed investigations in 22 out of 24 cases related to the Adani Group.
In January 2024, the Supreme Court concluded hearings on the related petitions and directed SEBI to complete the remaining investigations within three months.
The Bench, comprising Chief Justice of India DY Chandrachud, Justices JB Pardiwala and Manoj Misra, held that:
"The SEBI, and the investigative agencies of the Union government, shall probe into whether the loss suffered by Indian investors due to the conduct of the Hindenburg research and any other entities in taking short position involved any infraction of law, and if so, suitable action shall be taken."