The regulator has sought information from stock exchanges regarding Adani Green Energy’s communications on US investigations, they said, and will consider launching a formal probe after receiving the reports from the bourses.
American authorities indicated the Ahmedabad-based conglomerate made incorrect statements about an investigation into potential US anti-corruption law violations, whilst attributing these matters to external entities. Adani Group has denied any violations and said it is seeking legal remedies.
Sebi is examining potential disclosure rule violations by the conglomerate for not sharing important price-sensitive information, said the people cited. The regulator didn’t respond to queries.
Disclosure Requirement
Stock exchanges, serving as frontline regulators, enforce Sebi’s disclosure rules. These require companies to reveal information that could materially affect them or their share prices, including actions initiated by regulatory authorities, ongoing legal matters, and fraud by employees. How material the information is considered to be, is also gauged by the effect it has after disclosure.
“The disclosure of an ongoing investigation by US’ Securities Exchange Commission is, prima facie, a material event, which had a significant impact on the price of the Adani Green scrip, as per 30(4)(b) of the LODR (Listing Obligations and Disclosure Requirements),” said Joby Mathew, managing partner of Joby Mathew & Associates. “If not done, this can constitute a violation of LODR by Adani Green.”
Any such information should have been given to the stock exchanges. “If the company was aware of the investigation and chose to make a statement denying such investigation, then the same amounts to wrongful disclosure or knowing misrepresentation intended to conceal material information, which may also amount to fraud under the Sebi (Prohibition of Fraudulent and Unfair Trade Practices) regulations,” said Mathew.
Sebi can only impose monetary penalties for disclosure violations.
In the US, Adani Group chairman Gautam Adani, and his nephew and Adani Green executive director Sagar Adani, along with others, have been charged with allegedly orchestrating a $265-million bribery scheme.
This was aimed at getting state power distribution companies to buy expensive solar energy produced by Adani Green and CDPQ-owned Azure Power, according to the indictment. The conglomerate concealed the US investigation from investors to maintain access to American and international capital, it added.
Sebi previously investigated the group after Hindenburg Research allegations of stock price manipulation, round-tripping, money laundering and accounting fraud. The Hindenburg Research report was published in January 2023.
The regulator conducted and completed 24 investigations into matters including minimum public shareholding violations, foreign portfolio investment (FPI) limit breaches, trading before and after the release of the Hindenburg report and offshore derivative instrument norm violations.
Subsequently, Sebi issued show cause notices to FPIs, Adani Group companies including Adani Green, and directors Gautam Adani, his brother and Sagar’s father Rajesh Adani, and nephew Pranav Adani.