New Delhi, Sept. 22 -- The Securities and Exchange Board of India has settled adjudication proceedings over alleged violations of disclosure norms by four Adani companies and a former group company.
The five companies paid a little over Rs 1.5 crore (about $156,906) in total to settle SEBI's proceedings, without admitting or denying the regulator's findings and conclusions, according to a settlement order.
According to the settlement order, Adani Enterprises Ltd paid Rs 76.05 lakh; Adani Green Energy Rs 45.5 lakh; and Adani Total Gas, AWL Agri Business (formerly known as Adani Wilmar Ltd) and Adani Energy Solutions Ltd (earlier Adani Transmission Ltd) Rs 9.75 lakh each.
The regulator's findings from examining lapses in disclosure of related-party transactions and corporate governance at the companies have various similarities to the allegations raised by Hindenburg Research in a report in January 2023. Hindenburg was a US-based short-seller whose allegations of stock manipulation and other violations by Adani Group led to a selloff and dragged the market value of group companies by more than $100 billion. Adani Group denied those allegations. Hindenburg's founder shut down the firm in 2025.
Here is a quick explainer of what SEBI's allegations were and how it compares to what was given in the Hindenburg Research report.
1. SEBI's show-cause notice to Adani Enterprises said that AEL did not disclose in its FY13 annual report related-party transactions between AEL subsidiary Adani Estates Ptd Ltd and its related party Vakoder Investment Ltd.
Hindenburg had alleged that the same subsidiary had received Rs 609 crore (then $85 million) in investment from Vakoder. It claimed that while this transaction was recorded in AEL's 2020 annual report, there was "no disclosure that Vakoder's Investment involved a related party".
2. SEBI's examination alleged that AEL, Adani Total Gas and AEL Agri Business violated the listing regulations because their limited review reports for various quarters were signed by an auditor who did not have a peer-reviewed certificate. The auditor, Shah Dhandharia & Co LLP, signed the reports for AEL for the quarters ended June 2017, September 2017 and December 2021. It also signed Adani Total's and AEL Agri's reports for the quarter ended December 2021.
Hindenburg, too, had questioned Shah Dhandharia's competence in auditing firms such as AEL and Adani Total Gas. Its report had said, "Given the complexity of Adani Total Gas and, particularly Adani Enterprises, with 156 subsidiaries and many more affiliates and joint ventures, one would expect a large, highly experienced team to be monitoring its labyrinthian corporate structure."
Hindenburg said the group chose "a tiny auditor named Shah Dhandharia to oversee the audits for these two public companies". It pointed out that the firm had then audited only one other listed company (excluding Adani companies). That company was a penny stock called Globe Textiles, which then had a market cap of approximately Rs 64 crore.
3. A third similarity between SEBI's examination and Hindenburg's report is the concern raised around the involvement of the statutory auditor Dharmesh Parikh & Co LLP.
SEBI's investigation team alleged that Adani Green Energy and Adani Energy Solutions violated provisions under the listing regulations and the listing agreement for having several of their reports signed by this firm, which does not hold a peer-review certificate. Adani Green Energy had this firm sign its audit report for FY19 and limited reports for quarters ended September 2018, December 2018 and June 2019. Adani Energy Solutions had the firm sign its limited review report for the quarter ended June 2015.
Hindenburg Research had named the audit firm, saying that it shared the same address as Milestone Tradelinks. The short-seller had alleged that Milestone, which had lent Rs 750 crore to Adani Infra (India), was one of the shell entities that was used to prop up group companies.
Published by HT Digital Content Services with permission from VC Circle.