SEBI clears Adani Group of minimum public shareholding violation, holds ties alone don't prove 'control'

SEBI's final order closed a long-running investigation into whether Adani Enterprises, Adani Power, Adani Ports & SEZ and Adani Transmission breached the minimum public shareholding (MPS) norm, which requires listed companies to keep at least 25% of their shares with the public. SEBI had alleged that two Mauritius-based FPIs and an Indian entity, Opal Investments, which together held shares in the four companies, were in fact controlled by Mr. Vinod Adani, a relative of the group's promoters, so that their holdings should be added to the promoter group's stake, pushing public shareholding below 25%. Examining the legal test for 'control' under securities law, which covers both a de jure right to appoint a majority of directors and de facto control over management or policy decisions, SEBI held that control cannot be inferred merely from business or financial relationships; it must be shown through evidence of someone actually directing management or policy decisions.

Finding no such evidence linking Vinod Adani to the investment decisions of the FPIs or Opal, SEBI held the MPS violation not established and dropped the related fraud allegations, while imposing Rs. 20 lakh penalties each on two individuals for giving incomplete answers during the investigation.