Sebi issues show-cause notices to six firms of Adani Group

The Adani Group received notices from Sebi, with six companies under scrutiny for alleged breaches of regulations. Specifically, they have received show-cause notices concerning their involvement in related party transactions and their failure to comply with listing regulations. The companies implicated include Adani Enterprises, which serves as the flagship entity of Gautam Adani's business conglomerate, as well as Adani Ports and Special Economic Zone, Adani Wilmar, Adani Energy Solutions, Adani Power, and Adani Total Gas. Each of these companies has publicly disclosed Sebi's inquiries through regulatory filings with stock exchanges.

During the quarter ending on March 31, Adani Enterprises disclosed that it had received two show-cause notices. This development coincides with a broader trend within the Adani Group, as the other companies have also reported receiving notices from Sebi. Despite the assurances of legal counsel that the impact of these notices will be minimal, auditors - excluding those of Adani Total Gas and Adani Wilmar, have adopted a more cautious stance.

In their regulatory filings, the auditors of Adani Enterprises acknowledged their inability to provide definitive comments regarding potential adjustments or disclosures necessitated by the ongoing investigations. This cautious approach reflects the gravity of the situation, as Sebi's scrutiny follows allegations levelled against the Adani Group by Hindenburg Research, a US-based entity.

It is important to note that the issuance of a show-cause notice by Securities and Exchange Board of India does not imply guilt on the part of the companies under investigation. Instead, it serves as a formal request for these companies to provide explanations to mitigate the risk of legal action or monetary penalties.

Sebi's investigation, as outlined in a report submitted to the Supreme Court in August, is centred on 13 specific related party transactions flagged in the Hindenburg Report. This report raised concerns about the propriety of over 6,000 related party transactions, thereby casting a shadow over the operations of the Adani Group. The outcome of Sebi's inquiries has significant implications not only for the companies involved but also for stakeholders and investors monitoring developments closely.