Assessing the Long-Term Implications of Ongoing Regulatory Risks for the Adani Group

The Adani Group, once a symbol of India's corporate ascent, has faced a seismic shift in investor sentiment since the January 2023 short-seller report by Hindenburg Research. While the Securities and Exchange Board of India (SEBI) has exonerated the conglomerate of specific allegations related to related-party transactions, unresolved investigations and international legal challenges continue to cast a shadow over its long-term prospects. This article examines how these regulatory risks are reshaping institutional investor strategies and market dynamics.

SEBI's Partial Exoneration: A Mixed Relief

In September 2025, SEBI dismissed allegations that the Adani Group engaged in fraudulent related-party transactions through entities like Adicorp Enterprises and Milestone Tradelinks. The regulator concluded that these transactions did not meet the legal criteria for related-party dealings under existing rules and were repaid with interest before the investigation began SEBI gives clean chit to Adani Group in the Hindenburg case^[1]. This ruling triggered a short-term rally in Adani Group stocks, with shares of Adani Power and Adani Enterprises surging over 8% Adani Group stocks rally after SEBI dismisses some Hindenburg allegations^[2]. However, the relief is partial. SEBI's final order explicitly noted that investigations into compliance with minimum public shareholding rules and potential insider trading remain active Adani’s Regulatory Risks Not Over as Other Sebi Probes Continue^[3].

The unresolved public shareholding probe is particularly contentious. Hindenburg Research accused the Adani Group of using foreign portfolio investors (FPIs) in tax havens to circumvent the 25% public ownership requirement for listed companies. SEBI's expert committee has acknowledged the “chequered history” of its public shareholding norms, citing frequent amendments and inconsistent enforcement SEBI’s public shareholding norms have a chequered history^[4]. This regulatory ambiguity has left investors questioning the transparency of the Adani Group's corporate governance.

U.S. DOJ Indictment: A Global Reputational Crisis

While SEBI's actions have provided some clarity, the U.S. Department of Justice (DOJ) indictment of Gautam Adani and seven executives for a $250 million bribery scheme has compounded the group's challenges. The charges allege that the Adani Group secured solar energy contracts in India through bribes to government officials and misrepresented its anti-corruption practices to U.S. investors US charges against Gautam Adani, others spark legal and financial turmoil for Adani Group^[5]. This case has not only triggered legal proceedings in the U.S. but also led to the cancellation of key international deals, such as a $2 billion solar project in Kenya Stocks tumble, deals cancelled: The impact of US charges on Adani^[6].

The DOJ's actions have amplified concerns about the Adani Group's global credibility. Institutional investors, particularly those with exposure to U.S. markets, are now more cautious. For instance, foreign institutional investor (FII) holdings in Adani Enterprises dropped from 17.8% to 11.3% by September 2024, reflecting a broader trend of divestment Adani’s Regulatory Risks Not Over as Other Sebi Probes Continue^[7].

Investor Confidence and Portfolio Strategies: A Divided Market

The Adani Group's regulatory overhang has created a bifurcated market response. On one hand, domestic investors and some international partners, such as Abu Dhabi's International Holding Company, have reaffirmed their support, citing the SEBI ruling as a validation of the group's compliance Global Support And Partnerships Restore Investor Confidence In Adani Group^[8]. On the other, institutional investors are adopting a more defensive stance.

A Bloomberg report highlights that major fund managers are re-evaluating their exposure to Adani stocks due to the unresolved U.S. and SEBI probes. For example, Morgan Stanley and Jefferies have downgraded their ratings for Adani Green Energy, citing heightened legal risks Adani Group Approaches SEBI To Settle Shareholding Compliance Breach^[9]. Meanwhile, smaller investors, driven by retail enthusiasm, have continued to buy into the group's shares, creating volatility in free-float-adjusted valuations Adani’s Regulatory Risks Not Over as Other Sebi Probes Continue^[10].

The Path Forward: Regulatory Reforms and Market Resilience

The Adani saga has exposed critical weaknesses in India's regulatory framework. SEBI's delayed response to the U.S. DOJ allegations—failing to issue a show-cause notice until late 2025—has drawn criticism for perceived laxity SEBI needs to fasten its investigation of Adani to restore investor confidence^[11]. In response, the regulator has proposed amendments to ease minimum public shareholding requirements for large companies, aiming to reduce compliance burdens while addressing market concerns Sebi mulls easing minimum shareholding norms^[12].

For the Adani Group, the road to recovery hinges on resolving its remaining legal challenges. The conglomerate has already taken steps to rebuild trust, including pre-paying debts and engaging directly with investors. However, the U.S. DOJ case remains a wildcard. If the charges are proven, the group could face severe penalties, including restrictions on accessing U.S. capital markets Adani case: Why the latest US court filings and SEC disclosures matter^[13].

Conclusion

The Adani Group's regulatory risks underscore the delicate balance between corporate growth and governance in emerging markets. While SEBI's recent rulings offer a temporary reprieve, unresolved investigations and international scrutiny continue to shape investor behavior. Institutional investors are increasingly prioritizing risk mitigation, favoring diversified portfolios and hedging against regulatory uncertainties. For the Adani Group, the coming months will test its ability to navigate these challenges and restore long-term confidence in its business model.