In an attempt to settle the ongoing allegations over the public shareholding norms, many of the groups associated with Adani have moved settlement applications with the Securities and Exchange Board of India (SEBI). These allegations are against the listed companies of the Adani Group that failed to abide by the mandated public shareholding norms. To date, SEBI is examining the applications with offers from various Adani-associated individuals and entities.
Overview of the Settlement Offers
The SEBI probe over alleged public shareholding norms violations has haunted Gautam Adani-led billionaire group Adani Group. The group’s linked entities have reportedly filed settlement applications and among them is Mauritius-based Emerging India Focus Funds (EIFF) said to be owned by Vinod Adani, the elder brother of Gautam Adani. It has proposed a settlement amount of Rs 28 lakh.
Apart from EIFF, another settlement bids filed under the Adani Group comprise Vinay Prakash-a director at Adani Enterprises; Ameet Desai, the director at Ambuja Cements also filed with the same of paying Rs 3 lakh and would settle down his case. Meanwhile, their settlement application for this case by the Adani Enterprise has come ahead, while expecting more applications may come as such from all entities of the group.
These settlement applications were filed after a show-cause notice was issued by SEBI on September 27. Although filing a settlement application does not amount to a confession, settlement applications are usually deemed to be part of the regulatory process. Failure to file a settlement application within 60 days would also mark the end of any chance to settle the case. SEBI has not approved these applications yet.
The Allegations Against Adani Group Entities
The allegations against Vinod Adani and his group of entities are that of a network of intricate shareholding structures devised by them to avoid public shareholding norms in four significant Adani groups, namely, Adani Enterprises, Adani Power, Adani Ports and Special Economic Zone, and Adani Energy Solutions, earlier known as Adani Transmission.
SEBI issued show-cause notices to 26 entities that included the prime persons such as Gautam Adani, brothers Vinod, Rajesh and Vasant Adani, Nephew Pranav Adani, brother-in-law Pranav Vora. Questioned in these show-cause notices are why these entities must not be penalized, among other things also debar them from participating in the securities market.
SEBI claims Vinod Adani and his entities had siphoned off over Rs 2,500 crores through this shareholding scheme, which has given them immunity to public shareholding norms, wherein they would bring in the inflow through Foreign Portfolio Investors EIFF and EM Resurgent Fund, along with Opal Investments in share purchase. These three participated in public offering and institutional placements, hence complying with all shareholding regulations.
Findings of the investigation by SEBI
The investigation by SEBI started in October 2020, which was against the transactions of the period between 2012 and 2020. It revealed that the Adani Group entities had constructed complex structures to artificially inflate public shareholding in their companies. Shares of Adani Enterprises, Adani Ports, and Adani Power were acquired through a series of public offering initiatives such as Offer for Sale (OFS) and Institutional Placement Programme (IPP).
Earlier the public shareholding in the group companies of Adani Enterprises and Adani Ports were at 20% and 23%, respectively. Since these FPIs, including EIFF, joined the group, this went up to 25% in the both the groups as well thereby fulfilling the required conditions for the two entities. Yet again despite such transactions SEBI opined that the shares of entities should be categorized as belonging to the promoter group rather than any public shareholder.
The Adani Group’s Defense
The Adani Group outrightly denied all wrongdoing. According to the representatives of the group, the applications for settlement were filed out of caution and only to comply with procedural requirements. According to a source close to the group, the entities in question have raised objections to the charges and insisted on access to the evidence so far collected by SEBI. The source clarified that the applications do not admit or deny the charges but are made in the interest of regulatory compliance.
One of the key findings from the probe by SEBI is that all these entities associated with Vinod Adani had uniformly voted along with the promoters of the Adani group on such issues, such as approving related-party transactions and reappointment of directors. However, SEBI treated their holding as public shares. They claim they should have been treated as a promoter group.
Why SEBI Investigated Adani Group
SEBI began probing its investigation into the Adani Group over complaints filed in mid-2020 where it had raised concerns relating to the failure to meet the 25% public shareholding criteria for listed companies. In its wide-ranging probe, SEBI has also asked parties in question to pay massive sums, where it seeks Rs 1,984 crore from Vinod Adani and Rs 601 crore from five other entities.
It reflects a recent spurt in compliance towards transparency and obedience of shareholding norms, especially in broad-market corporates such as in the Adani Group. Scrutiny by SEBI aims at ensuring that corporates operate within public shareholding regulations and that undue influence of promoter groups on public shareholding is not encouraged.
Conclusion
The Adani Group’s settlement proposals in response to SEBI’s public shareholding inquiry mark a significant development in the ongoing regulatory scrutiny of the conglomerate. While the group denies any wrongdoing, the investigation highlights the complexities involved in corporate governance and shareholding structures. As SEBI continues to review these settlement applications, the outcome of this case could have broader implications for corporate transparency and shareholding norms in India.
It would settle the case for the Adani Group, and they would not be involved in long-drawn legal battles; their operations would continue without any further penalties. In contrast, the case also shows the necessity of regulatory compliance and demands more vigilance in the Adani corporate world.
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