The high level of promoter shareholding, as brought to light in the Hindenburg report, clearly extends beyond the Adani conglomerate.
Arjya B. Majumdar, Professor, Jindal Global Law School, O.P. Jindal Global University, Sonipat, Haryana, India.
Yash Gupta, Student, Jindal Global Law School, O.P. Jindal Global University, Sonipat, Haryana, India.
On 24 January 2023, a forensic financial research group by the name of Hindenburg Research released a report based on two years of investigation into the workings of the Adani group, a large Indian ports to edible oils conglomerate. This report makes a number of allegations of accounting fraud and share price manipulation.
One of the allegations levied on the Adani group involves their public shareholding being dangerously close to the minimum levels required. In order to understand this allegation and what it may mean for the Adani group and the entire Indian securities market, it may be helpful to analyze the evolution of the minimum public shareholding requirement in India.
Evolution of the Minimum Public Shareholding Requirement
Prior to 2010, the Indian Securities Contracts Regulations Rules required all listed companies to maintain at least 10% of their post-issue paid-up share capital in public hands. In 2010, the Securities and Exchange Board of India (‘SEBI’) increased this to 25%. Companies were given a maximum of three years to comply with this requirement. Additionally, there was an exception for large companies having a post-issue capital in excess of INR 40 billion. Such companies would be permitted to list 10% of their shares with a requirement to increase their public shareholding to 25% in the three years following the listing.
Published in: Oxford Business Law Blog
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