India’s ministry of corporate affairs has started a preliminary review of Adani Group’s financial statements and other regulatory submissions made over the years, two senior government officials told Reuters on Friday (3).
Adani Group has denied allegations by U.S.-based short-seller Hindenburg Research of improper use of offshore tax havens and stock manipulation, saying it has “no basis” and is due to an ignorance of Indian law. The Indian conglomerate has also said it has always made necessary regulatory disclosures.
Adani Group is battling a stock market rout which was triggered by the Hindenburg report on Jan. 24 and this week scrapped a $2.5 billion share sale.
The ministry’s review marks the latest scrutiny of the Adani Group, but a first by the federal government in New Delhi.
The Indian markets regulator is already investigating the matter, including the crash in the company’s shares, any irregularities in the now-shelved share sale and any possible price manipulation, Reuters reported this week.
The new ministry inspection process was initiated on Thursday, one of the government sources said, saying it was under “Section 206” of India’s Companies Act under which the government reviews financial documents submitted over the years, such as balance sheets, books of accounts or ledgers.
“An inquiry has been initiated by (the) Director General of Corporate Affairs. The ministry has been closely monitoring the situation and will take appropriate measures in time,” the first senior government official, who has direct knowledge of the proceedings, told Reuters.
A spokesperson for Adani Group did not immediately respond to a request for comment. The ministry of corporate affairs, as well as the Director General’s office, did not respond to requests for comment by Reuters.
A second government source confirmed the process had been initiated and will include looking into corporate governance practices of the company, but declined to elaborate.
The government officials declined to be named, due to confidential nature of the process.
The Section 206 legal provision under companies law also empowers India’s federal government to seek more documents from a company if it deems this necessary, such as minutes of meetings or board resolutions, two other sources familiar with the process said.
Both houses of India’s parliament were adjourned on Friday amid chaotic scenes as some lawmakers demanded an inquiry following the meltdown of shares in Adani Group companies, which some fear could spark wider financial turmoil.