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MUMBAI/NEW DELHI — India’s market regulator is investigating Adani Group’s links to some of the investors in the conglomerate’s aborted $2.5 billion share sale, two sources said, amid growing concern in New Delhi about a U.S. short-seller’s allegations against one of the country’s top industrial groups.

The Securities and Exchange Board of India (SEBI) is looking into any potential violation of Indian securities laws or any conflict of interest in the share sale process, said the two sources who have direct knowledge of the matter.

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The watchdog is investigating relationships between Adani and at least two Mauritius-based firms — Great International Tusker Fund and Ayushmat Ltd. — which participated as anchor investors, among others, said the sources, who spoke on the condition of anonymity due to the confidential nature of the probe.

Under India’s capital and disclosure requirement rules, any entity related to a company’s founder or the founder group is ineligible to apply under the anchor investor category. One of the sources said the focus of the probe would be whether any of the anchor investors are “connected” to the founder group.

The ports-to-energy conglomerate — controlled by billionaire Gautam Adani, one of the world’s richest people — has seen shares in its seven companies lose more than $100 billion in market value since the Jan. 24 report by Hindenburg Research, which accused it of improper use of offshore tax havens and stock manipulation. Adani has denied the charges. Last week, the group’s flagship entity Adani Enterprises pulled its secondary share offering, India’s largest ever, because of the sharp selloff.

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SEBI and the Adani Group did not respond to requests for comment about the investigation. Great International Tusker Fund and Ayushmat Ltd. also did not respond to requests for comment.

Also under the SEBI scanner are Elara Capital and Monarch Networth Capital, two of the 10 investment banks that managed the share offering, the sources said, adding that SEBI had approached the two firms last week.

The roles of Elara and Monarch are being examined by the market watchdog to rule out “any conflict” in the share offering process, one of the sources said.

Hindenburg has alleged one Adani private entity had a small ownership stake in Monarch – which has previously worked as a bookrunner for the group – saying “this close relationship seems to pose an obvious conflict of interest.” The short-seller also alleged that a Mauritius-based fund of Elara has invested 99% of its market value in three Adani stocks.

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Adani has said Monarch was selected for previous share sales “for their credentials and ability to tap into the retail market.” On Elara, Adani has said “innuendoes” that the firm was in any manner related to the conglomerate founders were incorrect.

When contacted before publication of this story, Monarch referred Reuters to an exchange disclosure on Feb. 3 that said an Adani entity has held “an insignificant,” 0.03%, stake in the company since 2016. Reuters was unable to confirm this from public records.

After the story was published, Monarch said in a stock exchange filing that it had not invested in the Adani share offering before its cancellation and there was “absolutely no question of any conflict of interest.”

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In the filing, Monarch said the Reuters report “comprises half-truths that paint an incorrect picture.” The company did not respond to requests seeking details of the alleged inaccuracies in Reuters’ reporting.

Elara did not respond to a request for comment on the regulator’s probe and Hindenburg’s allegations.

MEETING WITH MODI’S OFFICE

Solicitor General Tushar Mehta, representing the market regulator, told India’s top court at a hearing on Friday about investor losses following the publication of the Hindenburg Research report that: “SEBI is on top of the matter.”

Shares in Adani Enterprises extended their losses to 5% in Friday afternoon trade following Reuters’ report, having previously been down 2.5% earlier in the day. The stock ended the day down 4.1%.

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In recent days, the fallout of the allegations by Hindenburg, which stood to profit from the fall in the value of Adani Group assets, has come up repeatedly as a cause for concern at the national level, including at Prime Minister Narendra Modi’s office, two government officials said.

Opposition parties have protested in parliament to call for an independent probe into Hindenburg’s allegations.

The federal corporate affairs ministry, responsible for regulating Indian businesses, has briefed officials in Modi’s office and been in touch with SEBI, the market regulator, one of the officials said. Reuters could not determine the specific details of these discussions, which have not been previously reported.

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The ministry launched a review of Adani’s past financial statements on Feb. 2.

Modi’s office and India’s Ministry of Corporate Affairs did not respond to requests for comment about the regulatory probe into Adani after publication of the Hindenburg report.

The conglomerate has previously said Hindenburg’s allegations of stock manipulation had “no basis” and stemmed from an ignorance of Indian law. It has said it has always made the necessary regulatory disclosures. India’s Finance Secretary T.V. Somanathan on Saturday described the Adani issue as a “storm in a teacup” from a macroeconomic perspective. (Reporting by Jayshree P Upadhyay in Mumbai, Sarita Chaganti Singh and Devjyot Ghosal in New Delhi; Editing by Aditya Kalra, Sumeet Chatterjee and David Crawshaw)