Sebi is looking into Adani’s connections to FPO investors.

According to two sources, the market regulator is looking into the relationships between Adani Group and some of the investors in the conglomerate’s cancelled $2.5 billion share sale in light of the mounting concern in New Delhi over the claims made by a US short seller against one of the top industrial groups in the country. Sebi is looking into Adani’s connections to FPO investors.

The agency is probing connections between Adani and at least two Mauritius-based companies, the Great International Tusker Fund and Ayushmat Ltd., according to the sources.

The ports-to-energy conglomerate has lost more than $100 billion in market value since Hindenburg Research’s report on January 24 accused it of manipulating stock prices and improperly using offshore tax havens, making Gautam Adani, one of the richest people in the world, the company’s largest shareholder. Adani has refuted the accusations. Due to the quick selloff, the group’s main company, Adani Enterprises NSE -4.09%, postponed this week its largest-ever secondary share sale in India.

SEBI and the Adani Group’s requests for comments regarding the investigation did not receive a response. The Great International Tusker Fund and Ayushmat Ltd.’s requests for input were also disregarded. According to the sources, SEBI is also looking into Elara Capital and Monarch Networth Capital NSE 3.03%, two of the 10 investment banks that handled the share transaction. The sources further said that SEBI contacted the two businesses last week.

One of the people said that the market regulator is looking into Elara and Monarch’s obligations to eliminate “any conflict” in the share sale process. According to Hindenburg, an Adani private organisation purportedly maintained a small ownership stake in Monarch, which had previously worked as the group’s bookrunner. He said that “this intimate link seems to imply a clear conflict of interest.” The short seller further said that the market value of an Elara fund with a Mauritius address was comprised of 99% of the value of three Adani stocks.

Monarch was picked for past share sales, according to Adani, “because of their repute and ability to penetrate the retail market.” Adani has debunked “innuendos” about Elara’s business relationship with the founders of the group.

Monarch referred Reuters to a market report from February 3 that said an Adani company had made an “extremely small” 0.03% investment in the company since 2016. There are no public documents to back this allegation, according to sources. A request for comment about the regulator’s investigation and Hindenburg’s charges went unanswered by Elara.

The impact of Hindenburg’s charges, which intended to profit from the depreciation of Adani Group assets, has reportedly been brought up as a topic of concern at the national level, including at Prime Minister Narendra Modi’s office, according to two government officials. Opposition parties in parliament demanded that Hindenburg’s accusations be subjected to a fair examination.

One of the people said that the market regulator is looking into Elara and Monarch’s obligations to eliminate “any conflict” in the share sale process.

According to Hindenburg, an Adani private organisation purportedly maintained a small ownership stake in Monarch, which had previously worked as the group’s book runner. He said that “this intimate link seems to imply a clear conflict of interest.” The short seller further said that the market value of an Elara fund with a Mauritius address was comprised of 99% of the value of three Adani stocks.

In the past, the business asserted that Hindenburg’s allegations of stock manipulation lacked “substantiality” and were the consequence of a failure to comprehend Indian law. It asserts that it has always made the necessary regulatory disclosures. According to India’s finance secretary, T.V. Somanathan, the Adani debate is “a tempest in a teacup” from a macroeconomic perspective.

SC queries SEBI on potential protections for small investors

The Supreme Court ordered SEBI to submit changes to the regulatory framework on Friday in order to protect Indian investors from events like the collapse of Adani stocks, noting that the total loss suffered by Indian investors as a result of the Adani-Hindenburg issue was in the range of several lakh crores.

The stock market is now a place where investments are made not only by wealthy individuals but also by members of the middle class, according to a bench that included Chief Justice of India (CJI) DY Chandrachud, Justices PS Narasimha, and JB Pardiwala. The bench stated that the SC’s top priority was protecting investors from such volatility. The key fact is that Indian investors experienced a cumulative loss of several lakh crores in investment value.

“These are amateur investors and young attorneys who are present in court but have no influence.” How can you be sure they are safeguarded? How can we continue to preserve them in the future? “What function should the SEBI have?” While addressing requests for an investigation into the Hindenburg Research study on the Adani businesses, CJI DY Chandrachud made the statement.

The CJI said, “Today’s India is not what it was in 1990, and today’s stock market is not a place where huge investors participate; instead, investments are made by the whole middle class.”

During the hearing, the bench also suggested that a committee of financial sector experts be constituted to reinforce the present financial processes, and that SEBI perform a “threadbare study” of the power it now has and the extra authority it requires to solve these challenges.

In order to protect Indian investors from some of the volatility that has been seen over the past two weeks, we have indicated to the SG (Solicitor General) our concern about the need for the nation’s regulatory structure to be suitably strengthened. As a result, it would be important to assess the regulatory environment, relevant causal variables, and the need to put in place robust mechanisms to protect investors as needed.

We have also questioned the SG about the government’s willingness to join the formation of an expert committee. The SG has also been asked to provide a succinct factual and legal statement by next Monday, the court stated in its decision. According to SEBI’s Solicitor General Tushar Mehta, the situation is being “closely monitored by SEBI.”

“Your Lordships will hear from us, but SEBI is looking into it.” It would be early to speculate on the cause, but the news provided motivation. “Regulations are in place to address the issues, and we are also worried about investors,” added Mehta. While Tiwari has asked the court to create a committee to look into the accusations made in the Hindenburg research report, Sharma has asked the court to look into short sellers Anderson and his associates (in India and the United States) for exploiting innocent investors through short selling.

edited and proofread by nikita sharma