The Securities and Exchange Board of India (SEBI) has concluded its probe into allegations that Vinod Adani, brother of Adani Group chairman Gautam Adani, exercised control over certain foreign portfolio investors (FPIs). The market regulator stated it found no evidence to substantiate these claims, leading to the dismissal of proceedings related to alleged violations of minimum public shareholding (MPS) requirements.
The investigation, which originated from complaints received in June and July 2020, focused on two specific FPIs: Emerging India Focus Funds (EIFF) and EM Resurgent Fund (EMR). These funds had invested in four listed Adani Group companies: Adani Enterprises, Adani Power, Adani Ports and SEZ, and Adani Transmission (now Adani Energy Solutions).
Allegations of Disguised Promoter Holdings Unproven
A show-cause notice had alleged that shares held by the two FPIs between 2013 and 2018 were, in essence, promoter holdings disguised as public shareholding. This would have constituted a breach of SEBI's MPS norms, which mandate a certain percentage of shares to be held by the public to ensure market liquidity and fair pricing.
However, in its detailed 81-page final order issued recently, SEBI stated it could not establish that Vinod Adani was involved in the investment decision-making processes of EIFF and EMR. The regulator emphasized that de facto control must be demonstrated through concrete evidence of “positively directing management or policy decisions,” rather than being inferred solely from business or financial relationships.
No Evidence of Control Through Associates
SEBI also dismissed allegations that Vinod Adani exerted control over the FPIs through individuals such as Nasser Ali Shaban Ahli and Chang Chung-Ling, or that these individuals provided financing to underlying investors in Adani Group companies. The regulatory body reiterated that mere business or financial ties are insufficient to prove control.
While the primary allegations against Vinod Adani were not upheld, SEBI did establish that Ahli and Chang Chung-Ling failed to furnish correct and complete information during the investigation. Consequently, the regulator imposed a penalty of ₹20 lakh on each of them. Eighteen other entities previously named in the notice had already settled their proceedings by paying settlement amounts.
MPS Violation and Wrongful Gain Allegations Dropped
The show-cause notice had also alleged a wrongful gain of ₹1,984 crore through the investment structure. However, given SEBI's inability to establish effective control over the FPIs and Opal Investments Pvt Ltd (another entity mentioned in the context of Adani Power investments), the consequential allegations of MPS violations and related charges under the PFUTP (Prohibition of Fraudulent and Unfair Trade Practices) Regulations were not upheld.