6 Adani group firms receive SEBI notices for violations

3 May 2024 , 01:40 PM

Securities and Exchange Board of India (SEBI) has issued related show-cause notices for alleged violations in related party transactions and non-compliance with listing criteria to six Adani Group enterprises. The companies revealed this information in their regulatory filings to the stock exchanges.

The group’s flagship company, Adani Enterprises, revealed that it received two show-cause notices in the quarter that ended on March 31. The exchanges were also notified of SEBI’s recent investigations by Adani Ports & Special Economic Zone, Adani Power, Adani Energy Solutions, Adani Wilmar, and Adani Total Gas.

Adani Enterprises disclosed to the bourses that, for certain transactions with third parties, the parent company received two show cause notices from the SEBI during the quarter ended March 31, 2024, alleging non-compliance with the terms of the listing agreement and LODR regulations pertaining to related party transactions, as well as the validity of the statutory auditors’ peer review certificates with regard to prior years.

The companies claim that although legal guidance indicates that the regulatory notices will not have a significant impact, auditors—apart from those of Adani Wilmar and Adani Total Gas—took a cautious approach. This concern stems from the potential impact SEBI’s investigations may have on upcoming financial statements.

The Auditors stated “We are unable to comment on any potential adjustments or disclosures that may need to be made in the accompanying statement regarding this matter due to pending adjudications/outcomes of the Securities and Exchange Board of India’s investigations and our review of related documents.” Adani Enterprises’ auditors stated, “We will continue to assess the impact of this matter on our opinion based on any changes in circumstances or additional information that may become available.”

Adani Power stated in its filing that the business had replied to SEBI on both show cause notices after year-end. The statement claimed that the regulator had claimed that some transactions had not been disclosed in the financial statements of the relevant years and that the necessary permissions had not been obtained for them.

According to the charges, the corporation failed to secure the necessary approvals and failed to disclose certain information in the financial statements and annual report. Adani Ports and SEZ stated in its disclosures that it had failed to recall security deposits against cancelled contracts, which prevented the company from using the money for its primary business needs and, as a result, from abiding by its code of conduct.

An indictment is not what a show-cause notice is. A show-cause notice requests an explanation from the organisations as to why they should not be subject to fines or other legal action.

SEBI’s probe comes after US-based Hindenburg Research filed complaints against the Adani Group. Echoing concerns raised in the Hindenburg Report, the regulator named 13 particular related party transactions under examination in its August report to the Supreme Court.

The Hindenburg Report had placed doubt on more than 6,000 related party transactions, raising concerns about their suitability and threatening the Adani Group’s business.

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