What drove Adani group stocks into a tailspin again?

The new documents obtained by the Organised Crime and Corruption Reporting Project (OCCRP) reveal for the first time the details of an undisclosed and complex offshore operation in Mauritius. How will stocks face the storm?

By Nasrin Sultana

Published: Aug 31, 2023 07:01:05 PM IST

Updated: Aug 31, 2023 07:10:01 PM IST

A media statement by Adani said that the news reports appear to be yet another concerted bid by George Soros-funded interests supported by a section of the foreign media to revive the meritless Hindenburg report. Image: Reuters/Amir Cohen

In a fresh blow to the Adani group of companies, a global network of investigative journalists alleged that the conglomerate was involved in manipulating share prices of its companies from 2013 to 2018. These revelations come nearly six months after US-based research firm Hindenburg had raised questions on the Gautam Adani-led group of companies, their financial health and disclosures.

Reacting to the expose, investors rushed again to sell shares of Adani Group companies on Thursday, wiping off around Rs32,740 crore worth of wealth on a single day. Shares of Adani Enterprises, Adani Ports and Special Economic Zone, Adani Power, Adani Energy Solutions, Adani Total Gas and Adani Wilmar lost around 2 to 4 percent on the BSE, at closing on Thursday.

The new documents obtained by the Organised Crime and Corruption Reporting Project (OCCRP), and shared with the Guardian and the Financial Times, reveal for the first time the details of an undisclosed and complex offshore operation in Mauritius.

The OCCRP investigation says two men who secretly invested in the massive conglomerate turn out to have close ties to its majority owners, the Adani family, raising questions about violations of Indian law.

However, Adani group of companies have denied the report calling it ‘recycled allegations’. A media statement by Adani said that the news reports appear to be yet another concerted bid by George Soros-funded interests supported by a section of the foreign media to revive the meritless Hindenburg report.

“These claims are based on closed cases from a decade ago when the Directorate of Revenue Intelligence (DRI) probed allegations of over invoicing, transfer of funds abroad, related party transactions and investments through FPIs,” the statement by Adani said.

One of the key findings of OCCRP is that neither India’s stock market regulator nor a high-level expert committee has been able to prove what many suspect: That some foreign owners of publicly listed Adani Group stock are, in fact, fronts for its majority owners.

Exclusive documents obtained by OCCRP, which have been corroborated by people with direct knowledge of the Adani Group’s business and public records from multiple countries, show how hundreds of millions of dollars were invested in publicly traded Adani stock through opaque investment funds based in the island nation of Mauritius.

“In the documents, two of Vinod Adani’s close associates are named as sole beneficiaries of offshore companies through which the money appeared to flow. In addition, financial records and interviews suggest investments into Adani stock from two Mauritius-based funds were overseen by a Dubai-based company, run by a known employee of Vinod Adani,” Guardian reported.

In the investigate report, OCCRP had named two Mauritius-based offshore funds, Emerging India Focus Fund (EIFF) and EM Resurgent Fund (EMRF), as major investors in some Adani Group companies.

However, in a stock exchange clarification, 360 ONE Asset Management (Mauritius), which is the investment manager for Emerging India Focus Fund and EM Resurgent Fund, has said both the funds are fully compliant broad-based funds registered with Financial Services Commission, Mauritius.

“In neither of these two funds, the Adani group or any of the individuals mentioned in the article, are investors. These funds as on date have zero investments in any of the shares of the Adani Group. In the past, among many other portfolio investments, the funds have had investments in shares of Adani Group companies; all of which were sold in 2018,” 360 ONE Asset Management (Mauritius) said.

Also read: Hindenburg report 'malicious', confident of growth plans: Gautam Adani

The story so far…

Last Friday, market regulator, Securities and Exchange Board of India (Sebi), while submitting a status report, had informed the Supreme Court that it has completed 22 out of 24 separate investigations into the Adani Group. According to an Indian Express report, around a dozen companies, including foreign portfolio investors (FPIs) and foreign institutional investors (FIIs), based in tax havens, have been identified by the Enforcement Directorate (ED) as the "top beneficiaries" of short selling in Adani Group shares.

Earlier in January, following the massive sell-off triggered by Hindenburg Research, Adani Enterprises withdrew its Rs20,000 crore follow-on-offer (FPO). Aggressive selling by investors of Adani Group shares led to a massive loss of around $100 billion after the Hindenburg report was released. However, since then, shares of Adani group companies have rebound.

On January 24, Hindenburg Research, a US-based research firm, released a report levying various allegations on the Adani Group encompassing multiple litigations, related party transactions, shareholding ownership by few overseas investors in non-promoter group entities amidst other series of questions. In its response to the stock exchanges, the Adani Group refuted the allegations.

Gautam Adani, chairman and founder of Adani Group, had slammed the Hindenburg report. While addressing shareholders in the annual general meeting, Adani had said that it is a combination of “targeted misinformation and discredited allegations”, dating from 2004 to 2015.

“They were all settled by the appropriate authorities at that time. This report was a deliberate and malicious attempt aimed at damaging our reputation and generating profits through a short-term drive-down of our stock prices,” Adani said.

By the end of March, its cash flow generated from business operation and balances stood at Rs77,890 crore (or $9.4 billion), the company had said earlier. Out of the total, nearly 60 percent of its debts were from banks, while the rest are bonds raised from both India and offshore markets. The group’s total debt stood at Rs2.3 trillion in end-March, up from Rs1.89 trillion a year earlier.