Sebi turns down Adani-linked FPIs' settlement applications

India's capital markets regulator, Sebi, has rejected settlement applications submitted by foreign portfolio investors (FPIs) with large stakes in Adani Group companies, citing non-compliance with Sebi's proposed terms. The rejection was communicated to the FPIs' representatives last week, reigniting a dispute that began in October 2020 when Sebi's surveillance systems flagged their excessive holdings.

Sebi had initially identified 13 FPIs, which subsequently sought settlement. The regulator deemed the proposed settlement terms unacceptable and rejected the applications, following the recommendation of the high-powered advisory committee on settlement orders. The core issue was FPIs' reluctance to fully disclose essential information to Sebi, a prerequisite for settling.

Some FPIs were also unwilling to surrender the disputed amount. The 13 FPIs include Albula Investment Fund, Cresta Fund, MGC Fund, and others. They had filed multiple settlement applications in April 2024 after receiving show-cause notices from Sebi. The regulator's initial concern was whether these FPIs were genuine shareholders or fronts for Adani Group promoters.

Sebi's investigation involved examining price manipulation and breaches of shareholding norms across seven Adani stocks. Despite the rejection, Sebi may allow applicants to reapply under proposed rule changes, albeit with an additional 20% surcharge.