MUMBAI - India’s market regulator is investigating possible violations of “related party” transaction rules in the Adani Group’s dealings with at least three offshore entities that have links to the brother of the conglomerate’s founder, two people said.

The three entities allegedly entered into several investment transactions with unlisted units of the ports-to-power conglomerate founded by billionaire Gautam Adani over the last 13 years, said the sources with direct knowledge of the matter.

His brother Vinod Adani is either a beneficial owner, director or has links with those three offshore entities, said the two sources, who added that the regulator, the Securities and Exchange Board of India (Sebi), is probing if lack of that disclosure violated “related party transaction” rules.

Under Indian laws, direct relatives, promoter groups and subsidiaries of listed companies are considered related parties.

A promoter group is defined as an entity that has a large shareholding in a listed company and can influence company policy.

Transactions between such entities have to be disclosed in regulatory and public filings, and require shareholder approval above a specified threshold.

Violations are typically punished with monetary fines.

An e-mail to Sebi requesting comment was not answered.

Sebi chairman Madhabi Puri Buch declined to comment on the Adani investigations at a news conference on Wednesday.

An Adani Group spokesman said Mr Vinod Adani is a member of the Adani family and is part of the promoter group, but he does not hold any managerial position in any of the listed Adani entities or their subsidiaries.

“This fact, like all other material information required to be reported, has been disclosed to the regulatory authorities in the past and also as and when required,” the spokesman added, without commenting on the regulatory probe into offshore entities.

Mr Vinod Adani could not be reached for comment.

Requests for comment sent to his holding company in Dubai, Adani Global Investment DMCC, were not responded to.

The probe comes after United States short-seller Hindenburg Research’s Jan 24 report alleging improper use of tax havens and stock manipulation by the Adani Group, among other things – charges it has denied.

Hindenburg’s report eroded more than US$100 billion (S$133 billion) in the value of shares in the Adani group of companies.

India’s Supreme Court asked Sebi in March to investigate the Adani Group for any lapses related to public shareholding, related party rules or regulatory disclosures.

Sebi’s investigation into Adani’s possible related party transactions with offshore entities with links to Mr Vinod Adani has not been reported before.

While Sebi investigations are continuing, top regulatory officials are due to give a status report to a court-appointed panel on Sunday, the two sources said, speaking on condition of anonymity as investigations are private.

Hindenburg in its January report alleged that Mr Vinod Adani’s entities have collectively moved “billions of dollars” into Adani’s publicly listed and private entities, often without required disclosure of the related party nature of the deals.

In a 413-page response to the allegations, the Adani Group said all transactions entered into with entities who qualify as “related parties” under Indian laws and accounting standards have been duly disclosed.

The three offshore entities with links to Mr Vinod Adani being probed for related party transactions are Mauritius-based Krunal Trade and Investment, Gardenia Trade and Investment, and Electrogen Infra in Dubai. There was no response from Krunal, Gardenia and Electrogen Infra to e-mails requesting comment.

While the sources said that other similar transactions are also under regulatory examination, Reuters could not ascertain the names of other entities and their possible violation of related party transaction rules.

Sebi suspects there were “disclosure violations” on some of those transactions, said one of the two sources.

If proven, it could lead to monetary penalties and the matter may be referred to India’s Ministry of Corporate Affairs for transactions that are beyond SEBI jurisdiction, the source said. REUTERS