SEBI issues notices to 6 Adani group firms over related party transactions, listing regulations

Market regulator Securities Exchange Board of India (SEBI) has issued show cause notices to six Adani firms. As per regulatory filings by the Adani group companies to the stock exchanges, the notices are sent for alleged breaches in related party transaction and non-compliance with listing regulations.

Notice to Adani firms

Adani Enterprise disclosed the receipt of two show-cause notices during the quarter ending on March 31. Similarly, Adani Ports & Special Economic Zone, Adani Power, Adani Energy Solutions, Adani Wilmar and Adani Total Gas also informed the bourses about SEBI's recent inquiries.

SEBI in its notice has alleged non-compliance of provisions of the listing agreement and Listing Obligations and Disclosure Requirements (LODR) regulations pertaining to related party transactions in respect of certain transactions with third parties and validity of peer review certificates of statutory auditors with respect to earlier years which was issued during the quarter that ended March 31, 2024, according to Adani Enterprises.

Responding to the notices, the firms have said that legal counsel suggests minimal impact from the regulatory notices, auditors. However, Adani Wilmar and Adani Total Gas, took a cautious stance as SEBI's investigations could have implications on future financial statements.

"...on account of pending adjudications/outcome of the investigations by the Securities and Exchange Board of India and based on our review of related documents, we are unable to comment on the possible adjustments and /or disclosures, if any, that may be required to be made in the accompanying statement in respect of this matter. We will continue to evaluate the impact of this matter on our opinion based on any changes in circumstances or additional information that may become available," auditors of Adani Enterprises said.

Adani Power in its filings has said that the firm has responded to SEBI on both show cause notices which alleged that certain transactions were not reported in the financial statements of the relevant years and requisite approvals for these transactions were not taken.

"The allegations are that the company has not obtained the requisite approvals, and have not made the required disclosure in the financial statements/ annual report. Not recalling security deposits against terminated contracts leading to not using the funds for company's core business purposes and thus not complying with the company's code of conduct," Adani Ports and SEZ said in its disclosures

Adani-Hindenburg case

This regulatory scrutiny by SEBI follows an investigation into allegations levelled against the Adani Group by US-based Hindenburg Research. SEBI in a report submitted to Supreme Court in August identified 13 specific related party transactions under investigation, echoing concerns highlighted in the Hindenburg Report. Supreme Court too raised concerns over appropriateness of over 6,000 related party transactions, casting a shadow over the Adani Group's operations.

"During the quarter ended March 31, 2023, a short seller's report was published making certain allegations against some of the Adani Group companies (including the parent company). In this regard. certain writ petitions were filed with the Hon'ble Supreme Court seeking an independent investigation of the allegations in the short seller's report. During the proceedings, SC observed that the Securities and Exchange Board of India was investigating the matter. The SC also constituted an Expert Committee to investigate as well as suggest measures to strengthen existing laws and regulations and also directed the SEBI to consider certain additional aspects in its scope," Adani Enterprises said in its disclosure

Meanwhile, the expert committee submitted a report finding no regulatory failure in respect of applicable laws and regulations. dated May 6, 2023.

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