SEBI rejects charge of minimum public shareholding violation by Adani Group companies

Securities and Exchange Board of India (SEBI) had received certain complaints during June and July 2020 alleging, inter alia, non-compliance with the minimum public shareholding (MPS) requirements by certain listed companies in the Adani group. A show cause notice (SCN) was then issued. The allegations in the SCN dealt with alleged violations of MPS norms and Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (PFUTP Regulations).

The SCN had claimed that shares held by two foreign portfolio investors in Adani Enterprises, Adani Power, Adani Ports and SEZ, and Adani Transmission (Adani Energy Solutions) between 2013 and 2018 were in substance promoter holdings but were shown as public shareholding.

In an 81-page order, SEBI said that the allegations regarding violation of MPS norms and PFUTP Regulations contained in the SCN have not been established and found no evidence that Group Chairman Gautam Adani's brother Vinod Adani allegedly controlled the two FPIs.

"It has been held that there is no evidence to demonstrate involvement of Vinod Adani in decision making process of investments of the two FPIs in Adani Group Companies. Thus, it has been held that the investigation has not been able to prove that Vinod Adani controlled the decision of investment of two FPIs in Adani Group of Companies," SEBI said in its order.

The Show Cause Notice (SCN) also alleged control of Vinod Adani through his business relations Nasser Ali Shaban Ahli and Chang Chung Ling and further that Ahli and Ling provided financing to four underlying investors who invested in Adani Group Companies through two FPIs.

SEBI in its order said, "It has been held that no evidence has been produced which can show that Vinod Adani controlled Mr. Ahli or Mr. Ling and through them the investment decisions of Four Underlying Investors. Merely based on business or financial relationship, it cannot be held that Vinod Adani is in control of all of them. Any such conclusion would have unintended consequences for implementation of various securities laws in the capital market."

The regulator also rejected a similar allegation relating to Opal Investments Pvt Ltd.s shareholding in Adani Power.

"Since the foundational allegation of effective control over the FPIs as well as Opal has not been established, the consequential allegation relating to violation of the minimum public shareholding requirements has not been upheld," the order said.

With the MPS charge failing, SEBI also dropped allegations of fraudulent and unfair trade practices.

"Since the foundational allegation of effective control over the FPIs as well as Opal has not been established, the consequential allegation relating to violation of the minimum public shareholding requirements has not been upheld," the regulator said in its order. (ANI)