The violations have been described as “technical” in nature, and monetary penalties might ensue as a consequence.
Two sources familiar with the matter stated that the SEBI investigation into India’s Adani Group has exposed breaches of disclosure norms by listed entities associated with the group and the limits on offshore fund holdings.
Following concerns raised by Hindenburg Research based in the U.S. about the governance of the group led by Gautam Adani, the SEBI initiated the investigation, resulting in a market value reduction of the companies by over $100 billion.
The conglomerate involved in power generation from ports had denied wrongdoing in January.
Sources, who requested anonymity as they were not authorized to speak to the media, referred to the breaches as “technical” in nature, and after the investigation concludes, only nominal monetary penalties might be imposed.
India’s Supreme Court, overseeing the SEBI inquiry into the Adani Group, is set to hear the case on Tuesday.
One source mentioned, however, that there is no plan to make the SEBI report public until regulatory SEBI clears its order on the Adani probe.
On Monday, the group did not respond to a request for comment on SEBI’s conclusions.
SEBI also did not respond to emails on the matter.
On Friday, SEBI told the Supreme Court that it has almost completed the investigation into the Adani Group’s trades.
Sources said a key conclusion involved breaches in certain related-party transactions disclosures.
One noted, “Identification and reporting of related-party transactions with the associate side is necessary.” “Failure to do so can present an inaccurate picture of the financial position of the listed Indian company.”
In its court filing, SEBI said it had examined 13 instances of related-party transactions.
Sources mentioned that penalties for each violation could be as high as INR 10 million ($121,000).
They said the inquiry also found that certain Adani companies did not have offshore fund stakes in line with the rules.
Under Indian law, an unlisted investor is allowed to invest up to a maximum of 10% in any listed company in India as direct foreign investment via the foreign portfolio investor route.
A second source said, “Some uninformed unitholders have inadvertently breached this limit but denied giving details.”
It wasn’t immediately clear how large a fine the company could face for such breaches.
Reuters couldn’t ascertain which specific companies’ trades had been examined by SEBI.
In its response to Hindenburg’s allegations in January, the Adani Group had said all related-party transactions had been fully identified and disclosed.
It said that the group couldn’t comment on the trading patterns of offshore investors as they were public shareholders.
SEBI follows semi-judicial procedures before publishing an order against an entity, allowing it a chance to defend itself.
Based on the seriousness of the violations, SEBI might recommend actions ranging from monetary penalties to even market bans.
However, it wasn’t immediately clear what specific action SEBI would ultimately recommend in the Adani investigation.