Amidst heavy speculation over the extension of tenure to incumbent Sebi chief Madhabi Puri Buch, market regulator SEBI has issued show cause notices (SCNs) to 32 entities, four listed companies of the Adani Group and several other characters mentioned in the Hindenburg Research Report of 2022, sources told BW Businessworld. Funds that had invested in Adani Group have also got SCNs, the sources said. While Adani Energy Solutions and Adani Power have disclosed the SEBI SCNs, other companies Adani Enterprises and Adani Ports and SEZ are likely to disclose the same shortly. Current three year tenure of Buch expires in March 2025 and she is eligible for an extension.
SCNs have been issued under Sec.11 and 11(b) of the Securities Act., which give powers to SEBI to issue directions and also impose penalties for violations. The SCNs are linked to a breach of Sebi's minimum public shareholding norms, which are alleged to have been violated by the Adani Group and entities linked to it.
In its sensational report of 2022, US-based short seller Hindenburg Research had alleged that Adani Group promoter holding in listed companies was higher than it was being shown and entities linked to the promoters were holding stake in group companies in excess of Sebi rules. Hindenburg and the news reports following the Hindenburg report had also alleged that entities linked to Vinod Adani, the brother of promoter of billionaire Gautam Adani, were holding stake in Adani Group companies. These were classified as public shareholders despite being linked to the promoters.
Before publishing its report, Hindenburg said it had shorted Adani Group shares in the overseas market to benefit from the fall that the revelations in the report would cause.
Foreign Connections
Sebi SCNs also mention the group and its promoters' ties and dubious dealings with Taiwan-based investor Chang Chung-Ling, the sources said. Reportedly, Chang Chung-Ling is alleged to have long-time business ties with the Adani Group and having made considerable profits by buying and selling Adani stock through offshore funds, according to a report by the George Soros-backed Organized Crime and Corruption Reporting Project.
US based billionaire George Soros, who made his fortune mainly in market speculation, has been gunning for Prime Minister Narendra Modi, businessman Gautam Adani and his corporate house, perceived to be close to the Modi government. Soros breeds on short selling and breaking economics and countries. He has also admitted to have pointed out Jewish houses to the enemies of the community during the Holocaust.
According to the sources, Sebi SCNs allege that they have found material in allegations that Chang Chung-Ling held or continues to hold directorships in various group firms like Adani Global and former related-party Gudami International. Media reports had identified Chang Chung-Ling as the sole director of Growmore, allegedly a shell company based in Mauritius used to siphon off funds. According to the allegations by Hindenburg, Growmore netted an overnight $423 million gain through a stock merger with Adani Power. Chung-Ling’s son, Chang Chien-Ting, has also been identified as the sole beneficial owner of PMC Projects (India), another firm under scrutiny for undisclosed transactions with Adani Group and suspected to have been related-party transactions.
Sebi in its status report submitted to the Supreme Court of India last year had mentioned that it had investigated transactions with PMC Projects, Growmore, and Adani Global among the 13 related-party transactions. However, the SEBI report then did not detail any findings. But according to Hindenburg, Chung-Ling is said to have shared an address in Singapore with Vinod Adani, elder brother of Gautam Adani and now part of the promoter group.
Adani Power and Adani Energy Solutions have said that it is in the process of replying to SEBI and there are no violations on its part.
Allegations Against Sebi Chief
After targeting Adani Group, Hindenburg had also made allegations against the SEBI chief and revealed her private dealings. Reportedly, Buch held on to Equity Options of ICICI Banking Group, even when she was appointed first as SEBI member and later as the chief of the regulatory body. There are also allegations of Buch getting paid by ICICI Banking Group, which she has refuted. Recently, the government is likely to have given a clean chit to the SEBI chief with regard to personal allegations against her and her husband, who was appointed as an advisor to America's largest Private Equity player Blackstone, despite not being an expert on investments.
Recently, Buch failed to appear before a Parliamentary committee known as the Public Accounts Committee, chaired by the opposition Congress party. Buch retires in March and the government is likely to appoint a bureaucrat as the next Sebi chief to avoid any further controversies, like the ones surrounding Buch on her private matters.
