In a big boost to tycoon Gautam Adani, markets regulator Sebi on Thursday cleared the billionaire and his group of stock manipulation allegations made by US short-seller Hindenburg Research, saying fund transfer between group companies did not fall foul of any regulation.
Photograph: Amir Cohen/Reuters
The Securities and Exchange Board of India (Sebi) in two separate detailed orders said the allegations of insider trading, market manipulation, and violations of public shareholding norms were found to be unsubstantiated after a detailed investigation.
Hindenburg, which has since shut down, in January 2023 published a damning report against the Adani Group, alleging Adicorp Enterprises Pvt Ltd, Milestone Tradelinks Pvt Ltd, and Rehvar Infrastructure Pvt Ltd were used as a conduit to route funds from various Adani Group companies to fund publicly listed Adani Power Ltd and Adani Enterprises Ltd.
Sebi said fund transfer between the stated companies was loan which was repaid with interest in various tranches before the start of its investigation.
These transactions cannot be classified as related party transactions which require disclosure, as was alleged by Hindenburg.
There was no violation of Sebi’s disclosure norms as the transactions between Adicorp, Milestone Tradelinks, and Rehvar Infrastructure with the conglomerate’s firms did not meet the definition of a related party, Sebi board member Kamlesh C Varshney said in the two orders.
It also found no violations involving substantial acquisition of securities or control that could mislead investors.
As a result, Sebi concluded that there was no basis for assigning liability or imposing penalties on the Adani entities or executives.
Adani reacted to the clean chit by calling for an apology by those who spread false narratives using Hindenburg Research’s “fraudulent and motivated” report.
In a post on X accompanied by the national tricolour, Adani said the Sebi clean chit has reaffirmed what his group has always maintained — “that the Hindenburg claims were baseless”.
“Transparency and integrity have always defined the Adani Group,” the Adani Group chairman said. “We deeply feel the pain of the investors who lost money because of this fraudulent and motivated report. Those who spread false narratives owe the nation an apology,” he said.
He signed off the post with, “Satyamev Jayate! JAI HIND!”
The regulatory clean chit follows months of scrutiny and speculation triggered by Hindenburg’s damning report of January 2023, which triggered a stock rout of the listed Adani Group companies, eroding more than $150 billion in value at its lowest point.
Adani Group has repeatedly denied all allegations made in the Hindenburg report and its stocks recovered most of the losses before the a broader index meltdown set in.
A Supreme Court-appointed expert panel had previously echoed similar findings, noting no prima facie evidence of wrongdoing.
The apex court in January 2024 had said that no further probes into this were needed after Sebi closed its investigation.
While the Sebi clean chit is a big boost for the Adani Group, the ports-to-energy conglomerate is not yet clear of all charges.
The group chairman and key aides have been charged by the US Department of Justice last year in a $265-million bribery scheme.
Sebi in its findings said Adani Ports & Special Economic Zone Ltd transferred funds as loan to Adicorp Enterprises, which in turn transferred funds as loans to Adani Power Ltd.
Subsequently, the Adani Power repaid the loans to Adicorp along with interest, which in turn repaid the loans to APSEZ with interest.
Similarly, APSEZ transferred funds as loans to Milestone Tradelinks and Rehvar Infrastructure, which in turn transferred funds to Adani Power and Adani Enterprises as loans.
Subsequently, the Adani Power and Adani Enterprises repaid the amounts to Milestone and Rehvar, along with interest, which in turn repaid the amounts to APSEZ with interest.
Hindenburg had in its report alleged that Adani Group used three companies — Adicorp Enterprises, Milestone Tradelinks, and Rehvar Infrastructure — as conduits to route money between group firms.
According to the short-seller, this arrangement helped Adani avoid rules on related party transactions and bypass Sebi’s disclosure and approval rules.
Further, possible violation of PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) was also alleged.
Taking note of these allegations, Sebi carried out a detailed investigation covering the period from 2018-19 to 2022-23 to ascertain any possible violation of regulatory norms.
Also, Sebi examined whether these transactions, routed through Milestone and Rehvar, could be treated as related party transactions (RPTs).
The critical question was whether the use of such intermediaries amounted to concealing related party dealings.
In its orders, Sebi clarified that the broader definition of RPTs — which covers indirect or conduit transactions — only came into effect after the 2021 amendment.
The amendment was applied prospectively from April 1, 2022, with a glide path until April 1, 2023.
Thus, during the investigation period, such indirect routing was not explicitly covered under law.
Since the loans were duly repaid with interest and there was no evidence of fund siphoning or fraud, Sebi concluded that no regulatory violation had taken place.
Accordingly, all proceedings against Adani Group have been dropped.
Sebi also referred to the findings of a Supreme Court-appointed expert committee, which concluded that these transactions fell outside the scope of related party rules prior to the amendment.
Since the transactions were not “related party transactions”, the charge of fraud or manipulation did not stand. It suggested that funds were not siphoned and all loans were repaid with interest.
In all, charges have been dropped against Adani Ports, Adani Power, Adani Enterprises, Adicorp Enterprises, Milestone Tradelinks, Rehvar Infrastructure, Gautam Adani, his brother Rajesh Adani, and Group CFO Jugeshinder Singh, the order noted.
