Adani row: Why has SEBI not yet got to bottom of ‘Mauritius funds’, asks former RBI guv Raghuram Rajan

Former RBI governor Raghuram Rajan has asked why SEBI has not yet got to the bottom of ownership of the four Mauritius-based funds who are said to have parked 90 percent of their USD 6.9 billion in Adani group stocks, saying does the market regulator need help of investigating agencies for this?

The funds -- Elara India Opportunities Fund, Cresta Fund, Albula Investment Fund and APMS Investment Fund -- have been under cloud for the last couple of years after allegations that they may be shell companies. They came into focus once again in January when a US short seller alleged that Adani Group used offshore shell companies to inflate stock prices. Adani Group has repeatedly denied all allegations.

"The issue is of reducing non-transparent links between government and business, and of letting, indeed encouraging, regulators do their job. Why has SEBI not yet got to the bottom of the ownership of those Mauritius funds which have been holding and trading Adani stock? Does it need help from the investigative agencies?," Rajan asked. Because funds are registered in tax haven Mauritius, their ownership structure is opaque. Cresta, Albula and Elara have been subject to at least one probe for alleged round-tripping.

Hindenburg Research in a January 24 report accused Adani group of "brazen stock manipulation and accounting fraud" and using a number of offshore shell companies to inflate stock prices. The group has denied all allegations, calling them "malicious", "baseless" and a "calculated attack on India".

About what measures the government should take to improve oversight of private family companies to address worries after the Hindenburg allegations, the former RBI governor said he does not think the issue is of more oversight over private companies. The private businesses and family companies should be encouraged but there should be a level playing field for everyone, where no single promoter becomes all powerful, he said in an email interview to PTI.

"It does not serve the country well when certain families are seen as having privileged access to policymakers. Let businesses flourish based on their acumen, not on their connections," said Rajan, who is currently the Katherine Dusak Miller Distinguished Service Professor of Finance at The University of Chicago Booth School of Business.

The Supreme Court on Thursday asked the SEBI (Securities and Exchange Board of India) to probe within two months allegations of stock price manipulation by the Adani group and any lapses in regulatory disclosures, and also set up a six-member committee headed by former apex court judge Justice A M Sapre to look into the protection of Indian investors.

Last month SEBI had told the Supreme Court that it was investigating Hindenburg allegations. The apex court has asked SEBI to complete the investigation within 2 months. Adani group has in the past stated that it has "been fully compliant with applicable SEBI regulations" and "have made full disclosure to SEBI on specific information requests from them in the past".