NEW DELHI :An Indian court has ruled that the Adani Group does not need to face further investigations beyond the current scrutiny by the market regulator, providing significant relief to the conglomerate that faced allegations of wrongdoing from a U.S. short-seller.
The Securities and Exchange Board of India (SEBI) has been investigating the Adani Group, led by billionaire Gautam Adani, following Hindenburg Research's January 2023 allegations of improper use of tax havens and stock manipulation by the group. Despite the Adani Group's denial of these allegations, Hindenburg's report resulted in a $150 billion reduction in its stock market value. Although some investor confidence has returned in recent months, with Adani gaining support from bankers and investors, the Hindenburg saga and regulatory scrutiny have continued to impact the group's business dealings and reputation.
The Supreme Court of India, ruling on cases brought by public interest litigants seeking a special investigation team, stated that "the facts of this case do not warrant" such a change, even though the court had the power to transfer the investigation. The verdict indicates that there will be no increased regulatory or legal risk on the Adani Group beyond the current SEBI investigation.
In response to the court's decision, shares of various Adani Group companies rose, with Adani Energy Solutions up 9.1%, Adani Total Gas surging 7.1%, Adani Green Energy jumping 5.5%, and the flagship business Adani Enterprises rising 2.6%.
The court, overseeing the SEBI probe, also stated that there was no need to order any changes in the country's disclosure rules for offshore funds. Hindenburg had alleged that Adani's offshore shareholders were used to violate certain SEBI rules, despite the company maintaining its compliance with all laws.
After the Supreme Court ruling, Gautam Adani expressed on the social media platform X that the court's judgment shows truth has prevailed, and the group's "contribution to India's growth story will continue." Deven Choksey, managing director of KRChoksey Shares and Securities Pvt Ltd, a broker, commented, "Post this verdict, global investors will have more confidence in investing in the shares of the company."
The regulator had previously informed the Supreme Court that it would take appropriate action based on the outcome of its investigations. The court has given SEBI three months to complete its investigations.
The Supreme Court also stated on Wednesday that it does not need to intervene in the current regulations governing offshore investors of Indian companies. SEBI tightened those regulations in June, making disclosures more stringent to bring clarity to opaque corporate structures. Under Indian law, every company needs to have 25% of its shares held by public shareholders to avoid price manipulation, but Hindenburg alleged that some of Adani's offshore shareholders were used to violate this rule. Adani has maintained that it complies with all laws.
"The procedure followed in arriving at the current shape of the regulations does not suffer from irregularity," the court said on Wednesday, while backing SEBI's regulatory position on foreign portfolio disclosures.__Reuters
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