In December 2021, Mahua Moitra MP submitted a formal complaint to the Board in which she alleges that there are reasonable grounds for the Board to investigate whether the Adani Group has breached securities laws. Meanwhile, the Securities and Exchange Board of India (SEBI) has been examining Adani's proposed de-listing of Adani Power Limited for more than eight months.
Adani Power Ltd (APL) is one of India’s largest producers of coal-based power. It is headquartered in Ahmedabad, Gujarat, the home state of the founder of the Adani Group, Gautam Adani.
In June 2020, APL announced that it planned to de-list from the Indian stock exchange through a voluntary buyback of shares by Group company Adani Properties. The objectives given were that the delisting would:
- Allow Adani Properties gain total ownership of Adani Power.
- Improve APL’s strategic, operational and financial flexibility.
At the time, holdings in APL by Adani Group entities stood at just under 75%, with just over 25% being held by ‘public shareholders’. Under the law, a minimum of 25% of any public company must be owned by public shareholders – that is, shareholders not owned by the company’s promoters.
It was reported that the board of APL set Rs. 33.82 per share as the floor price for APL shares – a price reported as being 11% below the then market value.
According to the complaint, APL required a two-thirds majority vote in favour of the delisting from its independent shareholders (who constituted just over 25% of all shareholdings). On 24 July 2020, it was reported that the necessary majority of shareholders had given a green light to the delisting.
However, in 2021 the delisting was put under a cloud by a number of developments.
In June 2021, there was a dramatic crash in the value of shares of six Adani Group companies, including APL, following reports of a freeze on three Mauritius-based investment funds with significant holdings in the Group companies concerned. The Adani Group described the report as ‘blatantly erroneous’ and the share prices generally bounced back. However, this episode led to revelations about some of the Group’s investors.
On 19 July 2021 junior finance minister Pankaj Chaudhary stated under Parliamentary privilege that SEBI was investigating several Adani Group companies regarding compliance with securities laws. At the time the company denied being in receipt of any recent enquiries from SEBI.
In addition, questions were raised over the credibility of certain foreign portfolio investors (FPIs) in Adani Group companies, including APL. In two stories for AdaniWatch, independent journalist Ravi Nair described the complex lines of ownership and association between some of these ‘shadowy offshore investors’ and various dubious operators. Some of these foreign portfolio investors (FPIs), or foreign institutional investors (FIIs), are based in tax havens such as Mauritius and Cyprus.
One of these AdaniWatch stories was cited by Moitra in her December 2021 complaint to SEBI.
Amongst other things, Moitra alleged:
- APL’s public shareholding was ‘murky’, with FIIs holding 12.7% of the company – a very significant part of the minimum public shareholding of 25%.
- That many of the FIIs had a very high proportion of their assets invested in Adani companies such as APL, with little variation in this proportion over the years.
- APL had negligible percentage of holding by Domestic Institutional Investors such as mutual funds, which are known to be vigilant on behalf of their ‘small-time investors’.
Moitra‘s compliant urged SEBI to:
- Order an immediate investigation into the ownership of the Foreign Institutional Investors (FIls) which hold significant public shareholding in APL;
- Reject the de-listing proposal made by APL;
- Impose fines and penalties on APL for any critical violations of the SEBI Regulations in accordance with SEBI’s powers;
- Take appropriate action for any proven violations of the SEBI Act and SEBI Regulations.