SEBI Issues Notice to Adani Energy Solutions Over Alleged Wrongful Categorisation of Shareholding

Adani Energy Solutions Ltd (AESL), part of the Adani Group, has been notified by the Securities and Exchange Board of India (SEBI) regarding alleged misclassification of certain investors as public shareholders. AESL, in its second-quarter earnings report, mentioned it would address the concerns raised by SEBI by providing necessary information and clarifications to the authorities.

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In contrast, Adani Green Energy Ltd, another entity within the group that also announced its second-quarter results, has not received any new notices from SEBI. The ongoing scrutiny involves SEBI's listing rule, which mandates that at least 25% of a company's equity should be held by public investors. Typically, foreign portfolio investors linked to promoters are classified under promoter holdings.

SEBI's Investigation and Notices

Seven out of ten listed companies under the Adani Group have received show-cause notices from SEBI. These notices pertain to alleged violations related to party transactions and non-compliance with listing regulations for the quarter ending March 31. Companies such as Adani Enterprises Ltd, Adani Green Energy Ltd, and Adani Total Gas Ltd acknowledged receiving these notices in May.

The notices are part of an investigation initiated after Hindenburg Research accused the Adani Group of corporate fraud and stock manipulation in January 2023. Despite Adani's strong denial of these allegations, the report led to a significant drop in market value, wiping out approximately USD 150 billion at its lowest point.

Legal Proceedings and Outcomes

The Supreme Court (SC) intervened in the matter, noting SEBI's ongoing investigation and forming an Expert Committee to evaluate existing laws. The committee's report on May 6, 2023, found no regulatory failures. SEBI concluded investigations on 22 out of 24 issues by August 25, 2023.

On January 3, 2024, the SC resolved all related petitions and instructed SEBI to complete two pending investigations within three months. The court emphasized that SEBI should conclude all investigations according to legal procedures.

Impact on Adani Group Companies

Despite initial setbacks due to the allegations, most Adani Group stocks have recovered as the conglomerate devised a strategy for resurgence. A show-cause notice is not a conviction but seeks an explanation from entities about why legal action should not be pursued against them.

Adani Green Energy Ltd acknowledged in its filings that a short-seller's report had made specific allegations against some group companies. The holding company also received a show-cause notice concerning the validity of a Peer Review Certificate from one of its joint auditors for previous financial years.

The company has responded to this notice as part of its compliance efforts. As investigations continue, Adani Group remains focused on addressing regulatory concerns while maintaining transparency with authorities.