In January, investment firm Hindenburg Research accused the Indian multinational conglomerate Adani Group of stock manipulation and accounting fraud. It called it the “largest con in corporate history”, causing some companies to discontinue their relationship with the group.

Adani Group called the Hindenburg report “baseless”. Still, the report led to a massive $145bn fall in the market value of the Group’s listed companies before 26 February. However, it continued to build its foreign relations and managed to repay some of its loans to boost investor confidence. Despite investigations into the company’s finances, Adani managed to operate some of its planned projects without disruption.

Among its many businesses, Adani Group owns Adani Green Energy, operator of some of the world’s largest solar plants. It also owns Adani Power, “India’s largest private power company”, and Adani Total Gas. The company has a large public profile, and the accusations sparked protests, particularly at Adani’s alleged interference with India’s government.

How the SEBI investigated Adani

A month after Hindenburg’s allegations, the Supreme Court of India appointed the Securities and Exchange Board of India (SEBI) to investigate the matter within two months. Alongside an expert committee, the SEBI investigated whether the Group had failed to disclose any illegal transactions between related and concerned parties.

The SEBI identified 13 specific transactions to be investigated, regardless of whether they were previously considered “legal”. The board did not provide any more information about its suspicions.

In its report, Hindenburg identified 38 shell entities based in Mauritius that it alleged Adani used. These include offshore companies handled by Vinod Adani, the founder’s elder brother, who was previously accused of tax fraud. Other identified entities were founded in Cyprus, the UAE, Singapore and several Caribbean Islands where tax laws for headquarters of companies are favourable.

The SEBI had been investigating 13 overseas entities even before the accusations surfaced. It found 42 contributors to the assets under the 13 overseas entities. However, the SEBI has “drawn a blank” in its further investigations of these.

No artificial trading or “wash trades”

The committee presented a report on 6 May, providing an executive summary on whether the Group failed to disclose transactions between related parties to the SEBI, a routine requirement. It also looked at whether stock prices were manipulated after the accusations. Although there was high volatility in Adani stocks after the accusations from Hindenburg, the report said any Indian market volatility was not due to the accusations against Adani.

“The market has re-priced and re-assessed the Adani stocks. While they may not have returned to pre-24 January levels, they are stable at the newly re-priced level,” the 178-page report reads. The committee attributed the higher-than-usual stocks to the Hindenburg Report and its consequences. “The foundation of the SEBI’s suspicion that led to these investigations into the overseas entities’ ownership comes from their ‘opaque’ structures,” the panel said in the report.

Through an algorithm based on Adani trading data, the SEBI examined 849 alerts of Adani stocks. However, no artificial trading or “wash trades” were found, where stocks are exchanged to mislead market watchers. The board considered these stock exchange alerts in four reports, two produced before the Hindenburg report, and two after.

The stocks of the companies listed in the Adani Group were under scrutiny, as the SEBI sent multiple queries between 12 February and 22 April to seven key listed companies, including Adani Green Energy, Adani Total Gas, and Adani Power.

The SEBI reported that it was “apparent” that no international securities firms or banks wanted to engage in the matter. Only a few cited a conflict of interest, due to commercial relationships with the Adani Group.

Australia investigates Adani trades

Adani’s holdings in Australia saw it investigated by the Australian authorities. Australian mining company Bravus, owned by Adani Group, said that the Australian Securities and Investments Commission or the Australian Tax Office did not contact any of their business after the allegations were made. “It remains business as usual at our port, rail, and mine operations, which are exporting Australian coal, mined at the Carmichael mine and by our customers in the Bowen Basin, to the world,” the company said in a statement.

The report recognised an increased number of intra-day traders “coming into the market and the need to alert and inform them in advance of their trades”. As a result, the SEBI has urged the government to “take a hard close look” at the Indian securities market and focus on areas of unclaimed properties, including securities, dividends and bank deposits of the deceased investors. The report pushes for a centralised holistic approach towards unclaimed properties to not “burden investors with so much data and noise that the real content necessary to make an informed decision may be lost”.

Adani’s operations in India and foreign investment

Despite the allegations, the Group moved on to achieve some of its international goals, regardless of companies pulling out of deals. French energy firm TotalEnergies discontinued deals with the Adani Group to produce green hydrogen after the allegations from Hindenburg research were made public.

TotalEnergies had acquired a 20% minority interest in Adani Green Energy, with a 40% stake in Adani subsidiary AGEL23. This deal to develop solar power generation in India was worth $2.5bn.

On 1 February, Swiss lender Credit Suisse Group stopped accepting bonds from the Group. On 6 February, reports emerged that the Group would halve its spending, further triggering the decrease in the stock valuation of its listed entities.

However, few international deals and operations in India have continued as planned. In March, Adani Group publicly recorded a fall in stock prices. At the time, US-based investment firm GQG Partners, bought shares from four companies within the Adani Group for around $2bn. On 23 May, Reuters reported that GQG Partners had raised its stake in the Adani Group by almost 10%, and confirmed its participation in the group’s future fundraising.

Adani power operations continue, despite allegations

The Group discontinued some of its operations in the upcoming months; for instance, it halted the acquisition of a 2×600 MW coal-fired power plant in Janjgir Champa district in Chhattisgarh state in India for around $850m. Adani Power was supposed to expand its offerings and operate in the thermal power sector in the state. The Group soon discontinued another investment in Gujarat, a coal-to-polyvinyl chloride plant where the company would have spent around $4bn.

However, not all operations of Adani companies were disrupted. Adani Wind Energy Kutch Five, formerly known as Adani Green Energy Five, commissioned a 130MW power plant in Kutchh, state of Gujarat in India. The plant has a 25-year power purchase agreement with Solar Energy Corporation of India at ₹2.83/kWh ($0.035/kWh).

On 15 June, the Institutional Shareholder Services group of companies ranked Adani Green Energy’s ESG actions first in Asia. Analyst firm Sustainalytics ranked Adani as one of the world’s top 10 companies in the renewable energy sector for the financial year 2023. An Adani Green Energy spokesperson said its operations “provide clear environmental benefits through its contribution to fighting climate change and enabling the transition to a more sustainable energy system.”

Investigators seek more time

In mid-May, the Supreme Court granted the SEBI more time to complete its investigations on the allegations that accused Adani Group of stock price manipulation and violating minimum public shareholding requirements. Newspaper The Hindu reported that before the Court’s original hearing in early May, the SEBI requested at least six more months, as the accusations were complex and the suspicious deals needed further unravelling.

The SEBI report said the Committee must “examine if there is a regulatory failure or shortcoming in meeting the objectives for which regulations [for public shareholdings] have been made”.

The regulator also said it needs additional time to investigate possible violations relating to “misrepresentation of financials, circumvention of regulations and/or fraudulent nature of transactions”.

The next hearing will be held on 11 July. “The committee would be requested to take up any further aspects of suggestions as may be formulated by the court following the deliberations when the proceedings are next listed for hearing,” the bench said, reported by news agency The Indian Express.

The Supreme Court granted until 14 August to complete the investigations, while a court also requested the market regulator to submit an up-to-date status report on the investigation. In any case of genuine difficulty, the court would need to know by 14 August if the SEBI seeks more time.

The Hindu reported that for the SEBI to further investigate the suspicions, the investigation would require information about the economic ownership and not just the beneficial owners of 13 of Adani’s overseas entities.

“We are dealing right now with the fallout of the Hindenburg report. The purpose of these proceedings is not for us or any public interest petitioner to conduct a roving inquiry,” the CJI said.

“[Regarding] the investigation relating to 12 suspicious transactions [cited in the Hindenburg report], it is noted that these transactions are complex. This analysis will include a detailed examination of the bank statements of the concerned entities for the relevant period,” a SEBI statement said.