Informist, Friday, May 3, 2024

MUMBAI – Adani Ports and Special Economic Zone Ltd and Adani Enterprises Ltd, which reported their Jan-Mar earnings on Thursday, said in notes to the accounts section of their respective financial statements that they had received showcause notices from the Securities and Exchange Board of India, alleging non-compliance of listing norms including provisions pertaining to related party transactions.

Adani Enterprises said in the note to accounts that during the quarter "the parent company has received two show cause notices from the SEBI alleging non-compliance of provisions of the Listing Agreement and LODR (Listing Obligations and Disclosure Requirements) Regulations pertaining to related party transactions in respect of certain transactions with third parties and validity of peer review certificates of statutory auditors with respect to earlier years." The company said that it believed that there was no material consequential effect of the SEBI notices to its financial statements and that there was "no material non-compliance of applicable laws and regulations" by it.

The SEBI's showcause notices were apparently connected with Hindenburg Research's allegations in January 2023 against Adani group companies which included an allegation that funds had moved between Adani group-related entities and offshore funds and which were ploughed back into the domestic companies of the group.

Adani Ports said in its notes to accounts to its March quarter financial results reported on Thursday that "during the year, showcause notices were received from SEBI alleging (i) non-compliance of provisions pertaining to related party transactions under applicable regulations...with regard to the transactions entered in the earlier years with certain parties, essentially, from a substance-over-form perspective. The allegations are that the company has not obtained the requisite approvals, and have not made the required disclosure in the financial statements/annual report, and (ii) not recalling security deposits against terminated contracts leading to not using the funds for company's core business purposes and thus not complying with the company's code of conduct."

The company further said that the amount due in respect of the alleged transactions along with interest thereon "have been received in full before 31st March 2023 and there are no transactions with these parties in the current financial year (2023-24) and there are no losses suffered by the Company." It further said that "in its replies to SEBI, the Company has denied the charges in its entirety, inter alia, on the basis that these transactions are in full compliance with the prevailing laws and regulations."

Adani Power Ltd announced its March quarter earnings on Wednesday. In the notes to accounts, the company said that during Jan-Mar it "received two show cause notices" from SEBI alleging breach of related-party provisions of the listing norms by the company. Adani Power further said that it had responded to SEBI over both the notices. "Based on legal advice obtained, management believes that considering that alleged transactions with third parties were undertaken in compliance with applicable law at the relevant time, at terms comparable to market rates, and accordingly, there is no non-compliance of applicable laws and regulations as alleged by the SCNs (showcause notices), and the SCNs have no material consequential effects to the relevant years' financial statements," the company said.

Another Adani Group company Adani Green Energy Ltd reported its Jan-Mar earnings today. In the notes to accounts, the company said that "during the quarter ended 31st March 2024 the holding company has received show cause notice from the SEBI relating to validity of peer review certificate of one of the joint auditors in earlier financial years." The company said it has responded to SEBI and that it believed that the matter "is technical in nature and has no material consequential effects to relevant financial results, and that there is no material non-compliance of applicable laws and regulations."

Three more Adani Group companies, Adani Energy Solutions Ltd, Adani Total Gas Ltd, and Adani Wilmar Ltd, which reported their Jan-Mar earnings earlier this week, had disclosed that they had received SEBI showcause notices during the March quarter "relating to validity of peer review certificate" of former statutory auditors in respect of an earlier period. The companies said that they had responded to the SEBI showcause notices and that there was "no material non-compliance of applicable laws and regulations."

SEBI has a track record of imposing monetary fines on listed companies if its probes when completed establish any breach of listing norms, particularly pertaining to the related party transactions provision. It remains to be seen what will be the final outcome of the recent SEBI show cause notices to a few listed Adani Group companies.

Today, shares of Adani Ports ended 1.4% down at 1,320.30 rupees on the National Stock Exchange, while shares of Adani Enterprises closed 1.5% lower at 2,993.25 rupees. Adani Power's shares ended 0.6% down, while shares of Adani Green Energy closed 0.7% up at 1,799.80 rupees. Shares of Adani Energy Solutions ended 0.8% higher at 1,061.55 rupees, while shares of Adani Total Gas closed 0.2% down at 930.40 rupees. Shares of Adani Wilmar closed 2.1% lower at 344.25 rupees on NSE. End

Reported by Rajesh Gajra

Edited by Akul Nishant Akhoury and Aditya Sakorkar

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