Anil Agarwal named promoter, but holds no stake: Sebi asks IPO-bound Sterlite Electric to explain

On paper, Anil Agarwal has zero direct holdings in the Sterlite Electric Ltd, which last year filed its draft red herring prospectus (DRHP) for an initial public offer. But the Securities and Exchange Board of India, or Sebi, flagged his role as an individual promoter of Vedanta Group's power transmission company despite no direct equity interest, two of the three sources said.

Sebi put the initial public offering on hold in October, the regulator said then.

The regulator subsequently sought clarity on how Agarwal is related to the selling promoter, Mauritius-based Twin Star Overseas Ltd, and the extent of his direct equity interest in Sterlite Electric, the first person said.

Sterlite Electric's IPO has a fresh issue component and an offer for sale of 7.79 million shares by existing shareholders. Among these sellers, Twin Star Overseas is the only 'promoter' offloading stake via the OFS route, per the DRHP. It holds 69.46% of the pre-IPO equity capital of Sterlite Electric.

The Mauritian unit, Twin Star Overseas lists group holding company Vedanta Inc. as its 100% shareholder. To be sure, it is common for global business groups to route investments through tax havens such as Mauritius.

It is not clear what percentage of Vedanta Inc. is owned by Agarwal. There is no one who holds 15% or more voting rights in Vedanta Inc., according to the Sterlite Electric DRHP, first filed on 29 August, 2025.

The Mauritian Trail

Sebi is now asking Sterlite if and how Anil Agarwal is the ultimate beneficiary of Twin Star Overseas and, if so, to what extent.

Twin Star Overseas also holds 42.91% stake in Vedanta group's listed company Sterlite Technologies Ltd as of 30 September 2025, per stock exchange data. Sterlite Electric demerged from Sterlite Technologies in 2016 as the group decided to focus on telecom and power businesses independently.

Twin Star Overseas, however, is a different entity from Twin Star Holdings Ltd, which holds a 40.02% stake in Vedanta Ltd, the India listed entity of the group. Twin Star Holdings is classified as part of the promoter group of Vedanta. Vedanta, in turn, holds 61.84% in Hindustan Zinc, as part of exchange disclosures for the quarter ended 30 September, 2025.

Naming a founder with zero direct equity as a promoter creates a heightened burden of proof, an expert in corporate law said. Under current regulations, a promoter is a person or an entity instrumental in the formation of a company and is subject to fiduciary duties and specific legal liabilities, including civil and criminal liabilities. These duties include, but are not limited to, disclosing all material facts relating to the company’s business and formation with the relevant stakeholders.

“SEBI’s role is to ensure that investors have a clear picture of who ultimately controls or influences the company," explained Hardeep Sachdeva, senior partner at law firm AZB & Partners. “When a founder is designated as a promoter despite holding no direct shares, SEBI must scrutinize the indirect mechanisms of control—such as family ties, board influence, or beneficial ownership structures."

Beyond this, the regulator has also sought clarity on a group of non-cooperating family members, who would otherwise have been part of the company's promoter group, a second person explained.

Particularly, Sebi is asking why five of Agarwal's in-laws have refused to be identified as members of the promoter group and why have they not furnished details of their interests in the IPO-bound firm, this person said.

Family stepping back from promoter tag

Under Indian securities law, the promoter group must include immediate relatives, including siblings and their spouses and entities they control to ensure full transparency of ownership and potential conflicts of interest.

These five individuals have not provided their consent to be identified as members of the promoter group, according to the company’s disclosures. Furthermore, they have not provided the required information regarding their financial interests in Sterlite Electric or the entities they control. These entities might also include some interest of Anil Agarwal, the DRHP added.

Letters from Sterlite Electric to the five relatives have gone unanswered, leaving the company’s bankers unable to certify to Sebi that the IPO disclosures are complete or up-to-date, the company said in the draft papers.

The promoter group, excluding these five in-law relatives and their interests, holds 0.88% pre-offer stake. This group includes Agarwal's wife, his two brothers, and sister. It also includes his recently-deceased son and daughter, but they don't own any shares in the firm, as per the draft filing.

Sachdeva of AZB said that instances of 'non-cooperating individuals' surfacing in IPO processes are relatively uncommon but they do occur in situations where the definition of 'promoter group' under Indian securities law extends to relatives who may not be directly involved in the business.

Legally, there is limited scope to disassociate unless the company can demonstrate that such individuals have no role in financing, decision-making, or control. In practice, companies either persuade these individuals to cooperate or provide sufficient evidence to Sebi that their inclusion is not material to the promoter group’s functioning. "This often requires a careful balance between compliance and family sensitivities, and it can delay or even derail an IPO if not resolved," Sachdeva added.

On the same date that the company filed its DRHP, it also filed an application seeking an exemption from Sebi to exclude mandatory disclosures and confirmations from these five non-cooperating relatives and their associated entities.

In discussion with Sebi: Sterlite Electric

All three sources in this story confirmed that the company, its merchant bankers, and legal experts have been in constant touch with the regulator over the last two months and that these issues are now being ironed out.

“We are also in active discussion with the regulator and responding to all queries," a Sterlite Electric spokesperson told Mint in an emailed response. “In line with offer-period communication requirements, the company follows the prescribed process of addressing matters relating to the offer through disclosures contained in the statutory offer documents. Thus, there is no question of any 'insufficient disclosures' whatsoever."

Mint has reached out to Sebi for comments on the story. An emailed request for comment sent on 5 January was unanswered at the time of publishing this story.

The draft papers were first filed with the Registrar of Companies in August 2025, after which they were put in abeyance in late October. The regulator did not provide a public comment on why the offer was put on hold.

Though Sterlite Electric's offer moved out of abeyance in early December, Sebi, as of 9 January, is still awaiting clarifications from the lead managers on the issue.

Sterlite Electric, formerly known as Sterlite Power Transmission Ltd., operates in over 70 countries and reported revenue of ₹4,956 crore in fiscal year 2025.

The company had originally filed for a ₹1,250 crore IPO in 2021. It later withdrew the offer citing market volatility, news agency PTI had reported back then. There were no instances of non-cooperating individuals at that time.

The IPO's delay is the latest hurdle for the Agarwal-led business empire, which has been seeking to list its power transmission unit to pare debt and fund capital expenditure.

In July, US-based Viceroy Research shorted the debt stack of Vedanta Resources. It alleged that the group structure was financially unsustainable and posed a material risk to creditors. Vedanta subsequently rejected Viceroy's ₹2,500-crore loan-routing claim adding the loan transactions were executed in full compliance with the applicable laws.