Exclusive-India regulator probing some Adani offshore deals for possible rule violations

The Securities and Exchange Board of India (SEBI) is probing possible violations of “related party” transaction rules in the Adani Group’s dealings with offshore entities linked to Vinod Adani, the brother of the conglomerate’s founder. Sources with direct knowledge of the matter said that at least three entities have entered into several investment transactions with unlisted units of the Adani Group over the past 13 years. SEBI is investigating whether a lack of disclosure concerning Vinod Adani’s links with these entities violated rules for related party transactions. Violations typically attract monetary fines under Indian law.

According to Indian law, direct relatives, promoter groups, and subsidiaries of listed companies are considered related parties. Promoter groups are entities that have a large shareholding in a listed company and can influence company policy. Transactions between such entities must be disclosed in regulatory and public filings and require shareholder approval above a specified threshold.

SEBI’s investigation into Adani’s possible “related party” transactions with offshore entities with links to Vinod Adani has not been reported before. SEBI investigations are continuing, and top regulatory officials are due to give a status report to a court-appointed panel on Sunday.

Hindenburg Research published a report in January alleging that Vinod Adani’s entities collectively moved “billions of dollars” into Adani’s publicly listed and private entities, often without disclosing the related party nature of the deals. The Adani Group had denied the charges.

The three offshore entities with links to Vinod Adani being investigated for “related party” transactions are Mauritius-based Krunal Trade and Investments Ltd and Gardenia Trade and Investments Ltd, and Electrogen Infra in Dubai. There has been no response from Krunal, Gardenia, and Electrogen Infra to e-mails requesting comment.

SEBI suspects that there were “disclosure violations” on some of the other similar transactions being investigated. If proven, it could lead to monetary penalties and the matter may be referred to India’s Ministry of Corporate Affairs (MCA) for transactions beyond SEBI’s jurisdiction.