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Adani settlement claims delayed by India regulator review of processes

Two sources with knowledge of the issue said that India's market regulator had put on hold the Adani Group and its offshore investors' requests to settle a number of regulatory charges, until the internal processes were reviewed.

Last month, SEBI, where a new CEO took over in March, announced that it was reviewing the rules of settlement appeals. The review was prompted by a lack of uniformity and confusion in the rules governing the type of penalties that can be imposed.

Second source with direct knowledge said that the review could last three months, after which Adani's appeals would be heard under a new process.

SEBI's settlement procedure allows investors and market participants to pay a fine or accept regulatory directives without admitting or denying guilt.

Sources declined to identify themselves as investigations and court cases are confidential.

SEBI and Adani did not reply to emails seeking a comment.

SEBI started investigating the Adani Group in 2023, after US shortseller Hindenburg accused the group of improper use of tax hashes and stock manipulating. This led to a $150 billion sale despite Adani's denials. Since then, the shares have recovered.

The U.S. authorities have also indicted Gautam Adani, and the top executives of Adani Green. They claim that they paid bribes for Indian power supply contracts and lied to U.S. investors when raising funds. The company informed the stock exchanges of India on Monday that an independent review had not found any violation of the law by Adani officials.

SEBI in India was investigating 24 allegations against group companies in India and their offshore investors. This was stated in a 2023 filing to the Supreme Court.

Second source: Thirty Adani Group entities have filed applications to settle some regulatory charges.

Source: The Adani appeals are part of over 300 pending settlement applications, but they are being considered as the most important ones. SEBI has accused Adani Enterprises, Adani Ports, Adani Energy, and Adani Power, of incorrectly classifying certain shareholders as being public, according financial statements filed by the four companies.

Source: 26 other Adani Group and related entities were charged with reclassifying three Mauritius-based offshore funds' shareholdings as public shares when they were linked to Vinod Adani – brother of Adani Group Chairman Gautam Adani.

According to Indian law, a minimum of one-fourth (or more) of the shares in a publicly listed company should be owned by public shareholders.

The second source stated that these Adani entities wanted to pay a fine to settle the market infraction without proposing reclassifying the shares.

The other source said that in order for the settlement to be finalized, Adani Group companies would have to reclassify the shares owned by these funds to non-public holdings.

Separately, a dozen offshore fund invested in Adani Group companies were charged last year with violating disclosure rules and breaching regulatory prescribed investment limits. (Reporting and editing by Raju G. Gopalakrishnan; Jayshree Upadhyay)

(source: Reuters)