SEBI clears Adani executives in insider trading probe linked to SB Energy deal

The Indian capital markets regulator on Friday dropped insider trading charges against senior executives of the Adani Group and their alleged associates in cases concerning Adani Green Energy Limited’s (AGEL) acquisition of SB Energy in 2021.

The allegation in the case was that unpublished price sensitive information (UPSI) about the deal was shared with outsiders who then traded in AGEL shares.

However, after adjudication, SEBI’s quasi-judicial authority Santosh Shukla concluded that the allegations could not be sustained and disposed of the proceedings without issuing any directions including disgorgement or imposition of penalty.

The facts leading to the investigation were that in May 2021, AGEL announced it had signed share purchase agreements with SoftBank Group Capital Limited (SBGCL) and Bharti Global Limited (BGL) to purchase their respective stakes in SB Energy Holdings Limited (SB Energy).

SEBI noted that after this announcement, AGEL’s share price rose from ₹1,198.75 on May 18, 2021 to ₹1,243.65 on May 19, a gain of about 3.75 percent.

It also noted that SB Energy’s projects could produce 5 gigawatts in total, of which 1.7 GW was operational. AGEL had an operational capacity of 3.7 GW and a total capacity of 14.8 GW. Therefore, the acquisition led to an increase in AGEL’s operational capacity by 46 percent and overall capacity by 33 percent.

SEBI treated this transaction as potentially price sensitive and launched an investigation into trading in AGEL shares between January 28 and August 20, 2021.

In the case dealing with Pranav Adani, a director in several Adani Group companies, and his brothers-in-law Kunal and Nrupal Shah, SEBI alleged that Adani communicated the UPSI to Kunal Shah, who managed the trading accounts for himself and his brother.

They collectively bought over 1 lakh shares of AGEL in May 2021 at prices around ₹1,100 per share and later sold them, generating a combined notional gain of over ₹90 lakh.

In another case, which was adjudicated separately, SEBI alleged that Vinod Bahety, who was the head of mergers and acquisitions at the Adani Group and closely involved in the SB Energy deal, had disclosed the acquisition to financier Tarun Jain, along with his companies.

Jain allegedly used this UPSI to buy 2 lakh shares of AGEL on May 14, 2021, when the stock was trading around ₹1,077–₹1,078 per share. These shares were sold off in days immediately after the May 19 announcement, generating notional profits of about ₹3.51 crore.

While adjudicating both cases, the quasi-judicial authority noted the timing of media reports on the SB Energy deal.

On May 16, 2021, several newspapers carried detailed reports that AGEL was in advanced talks to acquire SB Energy, including the structure and value of the proposed transaction.

“The information being available in public domain cannot lead to any prohibited communication of UPSI or trading when in possession of UPSI,” the SEBI orders said.

SEBI also noted that the news reports on the talks had an impact on the company’s share price.

“The impact of the news reports on the price of scrip of the company was much more than when formal disclosure was made by AGEL on May 19, 2021 (to the stock exchanges), as the scrip hit upper circuit (an increase of 5%) on May 17, 2021, and an increase of 4.84% on May 18, 2021 as compared to increase of 3.75% on May 19, 2021,” SEBI’s orders state.

SEBI concluded that since the UPSI came into existence only after serious negotiations began and stopped being “unpublished” once the May 16 news reports appeared, the trades of the noticees were based on “generally available information” and not on insider knowledge.

Specifically in Bahety’s case, SEBI noted there was only a single conference call between Bahety and Jain and a single email before any UPSI period began relating to another project with Vedanta.

The order also noted that there was no material to infer that UPSI was communicated and, in any case, the UPSI in question did not exist on the date of the call.

Accordingly, SEBI disposed of the cases against the noticees without issuing any directions.

Senior advocate Vikram S Nankani along with advocates L Viswanathan, Indranil Deshmukh, Aditi Thakur and Jatiakumar R Jalundhwala, briefed by Cyril Amarchand Mangaldas (CAM) represented Adani.

Advocates Sumit Agrawal, Kavish Garach, Abhijeet Parge and Mahima Jayan, briefed by Regstreet Law Advisors appeared for the Shahs.

Senior advocate Pradeep Sancheti, along with advocates Aditya Bhansali, Akshaya Bhansali, Nirali Mehta, Suyash Bhandari and Supiya Nai, briefed by Mindspright Legal appeared for Bahety.

Advocate Shruti Rajan briefed by Trilegal appeared for Jain and his enterprises.

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