Vinod Adani Is Part of Promoter Group: Adani Group’s U-Turn on Gautam’s Elder Brother

After saying Vinod Adani does ‘not hold any managerial position in any Adani listed entities or their subsidiaries and has no role in their day to day affairs’, the conglomerate now says “the Adani Group and Vinod Adani should be seen as one”.

New Delhi: The Adani Group on Thursday, March 16, did a complete U-turn on its earlier stand that  Vinod Adani, the elder brother of Gautam Adani, does not hold any managerial position in Adani listed companies, admitting that he is part of the “promoter group” of various listed entities.

Vinod Adani kept a low profile until US-based short seller Hindenburg Research, as part of the explosive allegations against the Adani Group, claimed that entities controlled by him were used as a “conduit for money laundering and share-price manipulation”.

Subsequently, even as more reports alleged that Vinod – reportedly a Cypriot national – played a key role in the Adani Group’s foreign deals, the conglomerate maintained that Vinod did not hold “any managerial position in any Adani listed entities or their subsidiaries and has no role in their day to day affairs”.

Now, CNBC-TV18 reports, the Group has said in a statement that the Adani Group and Vinod Adani should be seen as one.

“We would like to submit that Mr. Gautam Adani and Mr. Rajesh Adani are individual promoters of various listed entities within the Adani group and Mr. Vinod Adani is an immediate relative of the individual promoters,” the group said, per the report.

Business Today had a slightly elaborated comment of the Adani Group on this matter, which said, “Accordingly, as per the applicable Indian regulations, Mr. Vinod Adani is part of the ‘promoter group’ of various listed entities within the Adani group. This fact has been submitted to Indian regulatory authorities from time to time in various disclosures.”

The company was responding to a report by the Morning Context that said that Adani Group does not own Ambuja Cements and ACC, and that the cement companies are owned by entities that are controlled by Vinod Adani.

The group had last year acquired Swiss-based Holcim’s cement businesses in India – Ambuja Cements and ACC Ltd – for $10.5 billion (around Rs 85,000 crore). This was the conglomerate’s largest-ever acquisition.

The deal made Adani the second largest cement player in the Indian market, after Aditya Birla Group’s UltraTech Cement.

The group used a special purpose vehicle called Endeavour Trade and Investment Ltd to buy the two cement companies from Holcim Group. The Mauritius-based entity is owned by Vinod Adani, the Morning Context reported.

This is significant because Hindenburg had accused the conglomerate of improper use of offshore tax havens. In its January 24 report, it mentioned Vinod Adani at least 151 times, alleging that the entities controlled by him were used as a “conduit for money laundering and share-price manipulation”.

The Hindenburg report said that Vinod “manages a vast labyrinth of offshore shell entities” that have “collectively moved billions of dollars into Indian Adani publicly listed and private entities, often without required disclosure of the related party nature of the deals.”

Also Read: A Journalistic History of the Adani Group

Related party transactions

Business Standard, in a report published on February 17, pointed out that the way the Adani Group conducts related party transactions is part of Hindenburg’s scathing report on the conglomerate. Adani had then denied the allegations on the related party transactions as “a lie”.

These are transactions that a company enters into with entities related to the owner or majority shareholder, also called the promoter. They are necessary when group companies are sources for business necessities like raw materials or technology.

However, there is a risk that the transactions can be skewed in favour of the promoters’ interests at the cost of other shareholders.

The newspaper reported that the stock market regulator investigates irregularities in related party transactions, but priorities depend on the chairperson.

“Under G.N. Bajpai, the Securities and Exchange Board of India (SEBI) was focused on market manipulation cases early this century. Data for present SEBI chairperson Madhabi Puri Buch is not available,” the business daily said.

While SEBI is examining the accusations, it has not issued any official statement. It has also not commented on the Adani Group’s U-turn regarding Vinod Adani.

Moreover, the totally contrasting responses by the Adani Group on Vinod Adani’s role in the company not only raises eyebrows, but it’s also a matter of grave concern if corporate governance is considered important for the Indian economy. SEBI has not raised any corporate governance red flags in the Adani Group.

Opposition politicians, who have been targeting Prime Minister Narendra Modi for his alleged close ties with Gautam Adani since the Hindenburg report, also pounced on the latest admission by Adani Group.

On March 15, opposition MPs demanded that the standing committee for finance summon the SEBI chief and other senior officials of RBI on the Hindenburg report and its findings with regard to the industrialist.

The ruling party MPs, however, said that this matter was sub-judice and therefore the panel cannot discuss this matter, ANI reported, citing sources.