In an application filed before the court, SEBI said that “in respect of the investigation/examination relating to 12 suspicious transactions, prima facie it is noted that 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”.

The plea added that “for ascertaining possible violations related to mis-representation of financials, circumvention of Regulations and/or fraudulent nature of transactions in respect of” the “12 suspicious transactions…given the complexity of the matter, SEBI in the normal course would take at least 15 months for completion of the investigation of these transactions, but is making all reasonable endeavours to conclude the same within six months”.

The SC, by its order on March 2, had given SEBI two months to complete the probe it was already conducting into the allegations against the group. Separately, the SC also set up a six-member expert committee “to investigate if there was a regulatory failure in dealing with the alleged contravention of laws pertaining to the securities market in relation to the Adani Group or other companies” and asked it to submit a report in sealed cover in two months.

The Hindenburg report, published on January 24, alleged the Adani Group of “brazen stock manipulation and accounting fraud”. It claimed that the group companies had “substantial debt” including pledging shares of their inflated stock for loans, putting the entire group on “precarious financial footing”. The Adani Group denied the allegations calling the report “malicious” and “baseless.” The report led to a rout in the share price and market cap of Adani companies.

The market regulator told the court that in pursuance of its order, it had attended two meetings called by the expert committee and had submitted a “detailed status report and the prima facie findings” to it.

The market regulator said that “examinations/investigations for which further time would be required would fall into three broad categories…Those where prima facie violations have been found and a period of six months would be required to arrive at conclusive finding…Those where prima facie violations have not been found, a period of six months would be required to revalidate the analysis and arrive at conclusive finding…In cases where, further examination/investigation is required and most of the data that is required for this purpose is expected to be reasonably accessible, a conclusive finding is expected to be arrived at in six months”.

Regarding the investigation relating to the 12 transactions, SEBI said that the allegations span over a 10-year period and added “this analysis would include detailed examination of…financial statements of listed entities and unlisted entities…Financial statements of offshore entities involved in the transactions…Disclosures filed with the stock exchanges including annual reports, balance sheets, quarterly financial statements and other event based disclosures…Minutes of the meetings of their Board of Directors and Audit Committee, wherever applicable…Bank statements of the concerned entities for the relevant period…Connections/relations are amongst entities, both domestic and overseas…Contracts and agreements, if any, entered between the entities along with other supporting documents”.

It said it had sent multiple emails seeking information from the Adani Group companies and “replies and documents/information received from the companies would require reconfirmation and reconciliation, as well as independent verification.”

SEBI said that the investigation would also require obtaining bank statements from multiple domestic as well as international banks and as the bank statements would also be for transactions undertaken more than 10 years ago, this would take time.

The process of seeking bank statements from the offshore banks would entail taking assistance from offshore regulators, which may be time consuming and challenging, the application said, and added that “only thereafter, analysis would have to be conducted for the voluminous bank statements”.

It further pointed out that even in the US, “as observed from the Annual Report of the Enforcement Division of Securities Exchange Commission, USA (SEC, USA) for the year 2020, generally the SEC, USA, takes about 34 months for completing the investigation”.