SEBI gives Adani Group clean chit, trashes Hindenburg Research claims of wrongdoing

SEBI has exonerated the Adani Group and its associated entities from all allegations raised in the Hindenburg Research report, stating that the claims were not substantiated. The regulator found no violations of related party transaction norms or LODR rules, and clarified that retrospective application of amended definitions was legally untenable. The proceedings were closed without penalty or directions.

Mumbai: Capital markets regulator SEBI on Thursday cleared the Adani Group and its associated entities of all allegations in the Hindenburg case.

The SEBI order states that the matter has been considered holistically, and the allegations made against the Adani Group “are not established”.

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“Considering the above, the question of devolvement of any liability on Noticees (Adani Group and associated companies) does not arise and hence the question of determination of quantum of penalty also does not require any deliberation,” the order further states.

The proceedings were disposed of without directions.

The alleged transactions were deemed genuine business dealings and not fraudulent or violative of RPT disclosure norms, given the legal framework applicable during the investigation period. RPT disclosures under the SEBI refer to the mandatory transparency requirements for related party transactions entered into by listed companies to prevent conflicts of interest and ensure fair dealings.

The order also states that there was no violation of Listing Obligations and Disclosure Requirements (LODR). The SEBI’s LODR norms mandate companies to disclose detailed information about these transactions to their audit committees and shareholders, including valuation reports for material transactions, and have a defined process for obtaining independent approvals.

The SEBI rejected the contention that the Adani Group had engaged in a scheme to conceal related party transactions, pointing out that the widened definition covering indirect transactions was only introduced prospectively via the 2021 amendment to the LODR rules. Applying it retrospectively, the regulator said, would be legally impermissible.

The SEBI probe also found that alleged loans and fund movements were fully repaid and did not qualify as undisclosed related party transactions or fraudulent market practices.

In January 2023, Hindenburg Research published a report accusing the Adani Group of accounting irregularities, stock manipulation, and hiding related-party transactions through layers of shell companies.

The report triggered a sharp sell-off in Adani stocks, erasing over $100 billion in the Group’s market value, following which the Supreme Court directed the SEBI to investigate the matter.

Interestingly, US-based Hindenburg Research later came under a cloud due to its controversial short-selling practices and shut down its operations amid widespread criticism in the Western press.