India’s market regulator has ‘hit a wall’ in the Adani probe

India’s market regulator’s investigation into the offshore shareholders of industrial tycoon Gautam Adani’s companies has “hit a wall”, according to a commission convened by the country’s highest court.

The Securities and Exchange Board of India, the country’s securities watchdog, began investigating offshore companies with stakes in Adani companies in 2020, but their investigation intensified this year after U.S. short-trade Hindenburg Research accused it of stock price manipulation and fraud. and Adani.

Following the allegations, which Adani strongly denied, a Supreme Court-appointed panel of lawyers, former bankers and business executives was asked to investigate whether the regulator had detected any wrongdoing by Adani companies.

According to the committee’s interim report – a copy of which was seen by the Financial Times – Sebi “took a blank” when investigating 13 offshore entities it deemed suspicious.

The 173-page report, which relies heavily on Sebi’s briefings, said it was not yet possible to infer any regulatory lapses, adding that Sebi had not found any pattern of share price manipulation.

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Hindenburg Research claimed that “offshore shells and funds linked to the Adani group make up the bulk of the largest ‘public’. […] the owners of the Adan shares”. According to stock exchange rules, at least 25 percent of the shares of listed companies must be owned by investors not affiliated with the group.

“Sebi has long suspected that some public shareholders . . . According to the commission’s report, “the ultimate chain of ownership over the 13 overseas entities holding Adani Group shares is unclear”.

Neither Adani nor the regulator immediately responded to requests for comment on the report.

As part of the investigation, Sebi has sought assistance from law enforcement agencies and regulators in seven jurisdictions, the report added.

The Supreme Court gave Sebi till mid-August to complete the investigation, extending the two-month deadline given in March. Sebi’s probe will also look into Hindenburg’s allegations of possible share price manipulation and violations of related party transaction rules.

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Tracing the identities of offshore shareholders was a “potentially destination-less journey” for Sebi, the report said, describing it as a “humane task”.

Claims by Hindenburg, a New York-based short manager, at one point wiped $150 billion from the combined market value of Adani’s listed companies and forced the group to abandon a $2.4 billion share sale.

Shares in the Adani group have since clawed back some of the losses, with Adani Enterprises, the billionaire’s flagship, up nearly 4 percent on Friday.

The report also said international banks, including Goldman Sachs and JPMorgan Chase, had declined the commission’s call for advice on cross-border deals, some citing “conflicts of interest arising from commercial ties with the Adani group”.

JPMorgan declined to comment and Goldman did not immediately respond to requests for comment.