Just when around four months are left for the current term of the incumbent Sebi chief Madhabi Puri Buch to end, the market regulator is fast issuing show cause notices (SCNs) to Adani Group companies. After Adani Energy Solutions, it has now come to light that SEBI has also issued not one but three SCNs to Adani Power, mainly for wrongful categorisation of promoter shareholding in the public category. The SCNs were issued during the September quarter of the current financial year, disclosures by the company have revealed. It is likely that even other listed companies of Adani Group may have received similar SCNs, the sources said.
In January 2022, the U.S. based short seller Hindenburg had alleged in its sensational report that entities close to or related to the Adani promoters were buying shares in the group companies but had not disclosed the same. SEBI has prescribed a minimum of 25 percent public shareholding in listed companies but Adani was circumventing these norms, Hindenburg had said in 2022. SEBI's SCNs are now making similar charges of wrongful categorisation of promoter shareholdings. Before Adani Power, it was Adani Energy Solutions that had disclosed the SEBI SCN in its quarterly filings. “During the current quarter, a SCN was received alleging wrongful categorization of shareholding of certain entities as public shareholding and consequences therefrom," the disclosure read.
Like many other Indian corporates in the past, the Adani Group is currently seen as a politically sensitive business house since it is headquartered in Prime Minister Narendra Modi's home state Gujarat. Opposition parties in India have long linked businessman Gautam Adani to the PM and created a public perception of nepotism and bias. Hence, any allegations against Adani Group gives more power to the opposition parties to take potshots at the PM.
"During the quarter ended 30th September 2024, SEBI announced in a press release, that it had concluded one of the pending investigations. Also, during the current quarter, the SEBI completed the other pending investigation and has issued a SCN to the Company, alleging wrongful categorisation of shareholding of certain entities, relating to SEBI public shareholding norms and consequences therefrom. Based on the foregoing and the fact that there is no pending regulatory or adjudicatory proceeding as of date on above matters except relating to the 3 SCNs as mentioned above, the management of the Company concluded that there are no material consequences of the allegations mentioned in the SSR and other allegations on the Group as at year ended 31 March 2024, and accordingly, the result for the year ended 3 March 2024 did not require any adjustments in this regard. There are no changes to the above conclusions as at and of the six months ended 30 September 2024," disclosures by Adani Power said.
Further, Adani Power said it was in process of responding to SEBI by providing information, documents and/or clarifications, as applicable. “Based on the legal opinions/ advice obtained, the management believes that all transactions with third parties, and all disclosures of promoter/ public shareholdings, were in compliance with applicable laws and regulations at the relevant time. and have concluded that, there is no non-compliance of applicable laws and regulations as alleged by the SCNs and no material consequential effects thereof to the current period and relevant years' financial statements/ financial results.”
Recently, Hindenburg also made allegations against the Sebi chief with regard to lack of disclosures on her private dealings and share trading related to her employee stock options. It was widely believed in the power circles that Buch may not get another extension after her current three year term comes to an end in March 2025 - controversies surrounding the SEBI chief were too much for the government to handle, the grapevine says.
An advertisement inviting applications from aspirational candidates is likely to be issued any time by the government before the winter session of the Parliament begins. The government is most likely to appoint an ex-bureaucrat as the next Sebi chief, since there is a feeling among the political bosses and PMO advisors that past records of IAS Officers are easier to track and are already known to the government. In the case of Buch, the government was finding it difficult to aggressively defend her, since she was a private individual living in Singapore a few years prior to joining Sebi. Buch is the former executive of ICICI Banking Group, where she rose from the rank and file under guidance and tutelage of KV Kamath. It was revealed recently that Buch was holding shares of ICICI Group companies (ESOPs). Opposition Congress had alleged that she received money from the bank even after joining SEBI. Buch has refuted all allegations.
