Mauritius-based FPIs named in Hindenburg report file appeal against new SEBI norms ahead of Sept 9 deadline

Adani-Hindenburg case: LTS Investment Funds and Lotus Global Investment, two Mauritius-based foreign portfolio investors (FPIs), filed a petition to the Securities Appellate Tribunal (SAT) looking for urgent relief from complying with the Securities and Exchange Board of India (SEBI) new foreign investor norms, reported Moneycontrol, citing court filings on Sunday, September 8.

The filings also showed that both entities filed the case and paid the fee to SAT on August 19, according to the news report. Both of the funds were mentioned in the January 2023, US-based short seller, Hindenburg Research's report on the Indian conglomerate Adani Group. The report was named “Adani Group: How The World’s 3rd Richest Man Is Pulling The Largest Con In Corporate History”, published on January 24, 2023.

What does the SAT petition say?

The petition alleged that the SEBI norms asking them to comply with certain rules and conditions which did not apply to other FPIs have unfair disadvantages to their investors, as per the report. The hearing of the case is set for next week, according to people familiar with the development cited in the report.

Both funds have asked SAT to order SEBI to rule on their exemption application swiftly and have also reported to protection from the SEBI diktat, asking funds not in compliance with the new FPI norms to unwind their portfolio by September 9, as per the report. They have asked SAT to direct SEBI to give them time until March 2025 for compliance, according to the report.

The report also stated that LTS disclosed that its global investment portfolio is nearly $4 billion, while Lotus said its portfolio worldwide has a value of $900 million. However, the size of their India portfolio was not found.

Both of the foreign investors are in breach of a condition which is to not have more than 50 per cent of their India investment in a single corporate group of stocks, as per the report.

Earlier media reports stated that multiple FPIs were facing issues due to the new FPI concentration norms, and as many as 43B applications have been filed with SEBI. Under the new norms, the excess holdings are to be diluted by September 9, according to the report.