By Jayshree P Upadhyay
MUMBAI (Reuters) – India’s market regulator is investigating a possible breach of ‘related party’ trading rules in Adani Group’s dealings with at least three offshore entities that have ties to the conglomerate founder’s brother, they said two people.
The three entities allegedly made several investment transactions with unlisted units of the ports-to-energy conglomerate founded by billionaire Gautam Adani over the past 13 years, sources with direct knowledge of the matter said.
Vinod Adani, the brother of Gautam Adani, is a beneficial owner, director or has ties to those three offshore entities, the two sources said, adding that the regulator, the Securities and Exchange Board of India (SEBI), is investigating whether any missing that disclosure. he violated the ‘related party transactions’ rules.
Under Indian law, direct relatives, sponsoring groups and subsidiaries of listed companies are considered related parties.
A sponsoring group is defined as an entity that has a large shareholding in a listed company and can influence company policy.
Transactions between such entities must be disclosed in regulatory and public documents and require shareholder approval above a specified threshold. Violations generally attract monetary fines.
An email to SEBI requesting comment was not returned. SEBI President Madhabi Puri Buch declined to comment on Adani’s investigations at a news conference on Wednesday.
A spokesman for the Adani Group said that Vinod Adani is a member of the Adani family and part of the promoting group, but does not hold any management position in any of the listed Adani entities or their subsidiaries.
“This fact, like all other important information that is required to be reported, has been disclosed to regulatory authorities in the past and also when necessary,” the spokesperson added, without commenting on the regulatory investigation of offshore entities.
Vinod Adani could not be reached for comment. Requests for comment sent to his Dubai holding company, Adani Global Investment DMCC, were not returned.
The investigation follows the January 24 report by US short seller Hindenburg Research alleging misuse of tax havens and stock manipulation by the Adani Group, among other things, charges it has denied.
Hindenburg’s report eroded more than $100 billion in the value of the shares of the Adani group of companies.
India’s Supreme Court asked SEBI in March to investigate Adani Group for any lapses related to public participation, related party rules or regulatory disclosures.
SEBI’s investigation into potential Adani “related party” transactions with offshore entities linked to Vinod Adani has not been reported before.
While SEBI’s investigations continue, top regulatory officials are due to deliver a status report to a court-appointed panel on Sunday, the two sources said, speaking on condition of anonymity as the investigations are private.
‘DISCLOSURE VIOLATIONS’
Hindenburg in his January report alleged that the Vinod Adani entities have collectively moved “billions of dollars” into Adani’s private and publicly traded entities, often without the required disclosure of the nature of the related parties of the proceeds. agreements.
The Adani Group, in a 413-page response to the allegations, said that all transactions carried out by it with entities that qualify as ‘related parties’ under Indian laws and accounting standards have been properly disclosed.
The three offshore entities with links to Vinod Adani that are under investigation for “related party” transactions are Mauritius-based Krunal Trade and Investments Ltd and Gardenia Trade and Investments Ltd, and Electrogen Infra in Dubai.
There was no response from Krunal, Gardenia and Electrogen Infra to emails requesting comment.
While the sources said other similar transactions are also under regulatory scrutiny, Reuters was unable to determine the names of other entities and their possible violation of “related party” transaction rules.
SEBI suspects there were “disclosure violations” in some of those transactions, one of the two sources said.
If proven, it could lead to monetary penalties and the matter may be referred to India’s Ministry of Corporate Affairs (MCA) for transactions that are outside SEBI’s jurisdiction, the source said.
(Reporting by Jayshree P. Upadhyay; Editing by Ira Dugal, Sumeet Chatterjee and Raju Gopalakrishnan)
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