New Delhi: The Securities and Exchange Board of India (SEBI), the statutory regulatory body for India’s securities and commodity market, cleared Pranav Adani, a director in several Adani Group companies and nephew of billionaire Gautam Adani, and others of charges of insider trading on Friday, as per news reports by the PTI and Bar and Bench.

A few months ago, SEBI had also cleared the Adani Group of charges of violating related-party transaction norms in matters arising from allegations made by US short-seller Hindenburg Research.

Pranav Adani cleared of charges

On December 12, Indian market regulator SEBI dropped insider trading charges against senior executives of the Adani Group and others in cases concerning Adani Green Energy Limited’s (AGEL) acquisition of SB Energy in 2021.

SEBI had been investigating the issue after it alleged that Pranav Adani had disclosed confidential details about AGEL’s planned acquisition of SB Energy Holdings Limited (SB Energy), a US digital infrastructure and energy platform, before the information became public; and that based on this information, outsiders had traded in AGEL shares.

According to Bar and Bench, AGEL had announced in May 2021 that 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.

After this announcement, AGEL’s share price rose from Rs 1,198.75 on May 18, 2021, to Rs 1,243.65 on May 19, a gain of about 3.75% in a day. Overall, the acquisition had led to an increase in AGEL’s operational capacity by 46% and overall capacity by 33%, SEBI had noted. SEBI treated this transaction as potentially price sensitive and launched an investigation into trading in AGEL shares between January 28 and August 20, 2021, the report stated.

SEBI expressed concerns that Pranav Adani had shared this unpublished price sensitive information with his brother-in-law Kunal Shah who managed trading accounts for himself and his brother, and Nrupal Shah. Collectively, they allegedly bought over 1 lakh shares of AGEL in May 2021 at prices around Rs 1,100 per share and later sold them, generating a combined notional gain of over Rs 90 lakh.

To investigate this, SEBI looked into trading in Adani Green Energy Ltd (AGEL) shares between January 28 and August 20, 2021. After reviewing an investigation report in November 2023, the regulator believed there could have been breaches of insider-trading norms and initiated proceedings against Pranav Adani, Kunal Shah and Nrupal Shah, PTI reported.

These are the charges that SEBI has now dropped.

PTI reported that in its 50-page order, SEBI noted that a phone call dated May 16, 2021, was not for communicating any unpublished sensitive information by Adani and that the trading that Kunal and Nrupal Shah undertook “were genuine and not influenced by any UPSI about the company or its securities”. Therefore, the allegations could not be sustained; and since the trades appeared genuine, no penalties or directions were required, SEBI ruled.

Detailed reports in media

Similarly, in another case (adjudicated separately), Bar and Bench reported, 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 information to buy 2 lakh shares of AGEL on May 14, 2021, when the stock was trading around Rs 1,077-1,078 per share. These shares were sold off in days immediately after the May 19 announcement, generating notional profits of about Rs 3.51 crore.

While adjudicating both cases, the quasi-judicial authority noted the timing of media reports on the SB Energy deal. The rport added that the SEBI authority, Santosh Shukla, said that on May 16, 2021, several newspapers had 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,” Bar and Bench quoted the SEBI orders as saying.

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 stated.

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