File photo of Adani Corporate House at Shantigram, outskirts of Ahmedabad
| Photo Credit: VIJAY SONEJI

The Securities and Exchange Board of India (SEBI) on April 29 asked the Supreme Court for six more months to complete its investigation into Hindenburg Research’s damning report accusing the Adani Group of “brazen stock manipulation and accounting fraud schemes over the course of decades”.

“Where prima facie violations have been found, a period of six months would be required to arrive at conclusive finding. Where prima facie violations have not been found, six months would be required to revalidate the analysis and arrive at conclusive finding. Where further investigation is required and most of the data required for this purpose is expected to be reasonably accessible, a conclusive finding is expected to be arrived at in six months,” SEBI said in its application.

The market regulator said it was probing “12 suspicious transactions” raised in the Hindenburg report.

“Prima facie, these transactions are complex and have many sub-transactions and a rigorous investigation of these transactions would require collation of data/information from various sources along with detailed analysis including verification of submissions made by the companies,” SEBI noted.

Detailed investigation process

The “analysis” would include pouring over the financial statements of offshore entities involved in the transactions, disclosures filed with the stock exchanges, minutes of the meetings, connections/relations among entities both domestic and overseas and examination of contracts and agreements, the application explained.

It said the “detailed investigation process” of the SEBI would include depositions from key managerial personnel, statutory auditors and other “relevant” persons. It would also entail obtaining bank statements from multiple domestic as well as international banks for transactions that may date over 10 years back.

“Various information/documents were sought from entities such as the seven listed Adani companies (Adani Enterprises Limited, Adani Power Limited, Adani Transmission Limited, Adani Green Energy Limited, Adani Ports and Special Economic Zone Limited, Adani Total Gas Limited and Adani Wilmar Limited), including subsidiaries, step down subsidiaries and other private entities, allegedly involved in the transactions,” SEBI informed the court.

Causal factors

On March 2, the apex court had formed an expert committee headed by former apex court judge, Justice Abhay Manohar Sapre, to investigate the causal factors and existence, if any, of regulatory failure which led to investors losing crores due to the volatility in the securities market following Hindenburg Research’s report accusing the Adani Group of manipulation of share prices and account fraud.

SEBI and other agencies were directed by the court to cooperate with the committee and provide it with all “material and requisite information”. SEBI, at the time, was already investigating the Hindenburg report.

The SEBI probe covered probe into whether the Adani Group had violated laws like the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003; SEBI (Prohibition of Insider Trading) Regulations, 2015; SEBI (Foreign Portfolio Investors) Regulations, 2019, Offshore Derivative Instruments (ODI) norms, short selling norms, if any.

The court had asked the SEBI to also investigate alleged violations of the Securities Contract (Regulation) Rules of 1957.