Adani Group stocks plunge sharply in early trade as petitioners allege Sebi of inaction

The weakness was seen across all Adani Group company stocks after the PIL petitioners in the Adani-Hindenburg row filed their responses to capital markets regulator Sebi's status report on the Adani probe.

In an affidavit, the petitioners have levelled charges of inaction, conflict of interest, and dilution of regulations against Sebi.

Sebi suppressed important facts from the Supreme Court and "slept over" the Directorate of Revenue Intelligence's (DRI) letter on alleged stock manipulation by the Adani firms, one of the PIL petitioners has alleged in the apex court.

The petitioners claim that in January 2014, the DRI wrote to the then Sebi Chief, UK Sinha, about an ongoing investigation into alleged over-invoicing by Adani group companies during the import of power equipment. They submit that DRI had red-flagged possible stock price manipulation through the overvaluation of imported equipment.

The application expresses shock that the market regulator suppressed and concealed information about the DRI alert from the apex court. The petitioners also raised concerns about how Sebi never conducted any probe based on the DRI findings.

They argue that UK Sinha is currently serving as Non-Executive Independent Director Chairperson of NDTV, which was acquired by the Adani Group last year.

The petitioners are also making a case of conflict, citing that Cyrill Shroff is on Sebi's Corporate Governance Committee, which looks at offences like insider trading. They submit that five out of 24 Sebi probes are related to insider trading.

The plea argues that since Cyrill Shroff's daughter is married to Gautam Adani's son, there is a clear conflict of interest.

The petitioners also referred to documents that have been unearthed during an investigation by a journalist consortium 'Organized Crime and Corruption Reporting Project'. The affidavit said two Mauritius-based companies- Emerging India Focus Fund (EIFF) and the EM Resurgent Fund (EMRF)- had invested and traded in a large volume of shares of four Adani companies between 2013 and 2018.

The petitioner claims that Mauritian entities are fronts for Vinod Adani and that his holding in Adani stocks breaches Minimum Public Shareholding norms.

US-based short seller Hindenburg Research, in a late January report, had alleged accounting fraud, stock price manipulation and improper use of tax havens, triggering a stock market rout of the Adani group shares that erased close to $150 billion in market value at its lowest point.

Following this, the top court had asked the market regulator to look into the allegations and submit its findings.

In March, a separate six-member expert panel was formed which included a retired judge and veteran bankers, to go into regulatory aspects of the allegations. That panel said in May the Sebi has so far drawn a blank in its investigations and its ongoing pursuit of the case is a "journey without a destination".

The SC set August 14 as the deadline for the market regulator to conclude its investigation and submit the report. The regulator sought a 15-day extension to conclude the investigation. It has now submitted a status report on its probe.

On its part, the ports-to-power conglomerate has rejected all allegations.