Sebi Issues Show-Cause Notice to Adani Group Over Alleged Misclassification of Public Shareholders

The Securities and Exchange Board of India (Sebi) has issued a show-cause notice to the Adani Group, alleging that it misclassified certain investors as public shareholders. This development was disclosed by Adani Energy Solutions in its quarterly results for the September quarter, filed on October 22, 2024. The company mentioned that the notice was received during the September quarter but did not provide specific details. The notice claims that the Adani Group incorrectly categorized the shareholding of certain entities as part of its public shareholding.

Adani Energy Solutions responded by stating its intent to cooperate with regulatory and statutory authorities, ensuring all necessary information, documents, and clarifications will be submitted. The company reassured stakeholders that, based on legal advice and an internal accounting review, there are no further regulatory actions expected beyond two pending show-cause notices. One of these notices is related to the investor classification issue, while the other, received in the March quarter, pertains to the validity of peer review certificates issued by its statutory auditors, which remains unresolved.

In addition, Adani Energy Solutions addressed the ongoing impact of allegations made by Hindenburg Research in January 2023, which accused the Adani Group of violating Minimum Public Shareholding (MPS) norms. The report claimed that certain foreign funds holding stakes in Adani companies were linked to the promoter group. In its quarterly filing, the company reiterated its stance that the Hindenburg report has had no material consequences and emphasized that it remains in full compliance with applicable laws and regulations.

Sebi’s regulations require that at least 25% of a listed company’s equity be held by public shareholders. If entities, including foreign portfolio investors, are linked to the promoter group, their holdings must be reclassified as promoter holdings.

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