Adani Shares Dip By $4.2Bn After Reports Say Family Associates May Have Bought Shares to Fuel Group’s Growth

OCCRP writes that documents obtained by its reporters and shared with the Guardian and Financial Times reveal how investments flowing into the Adani Group from “a pair of Mauritius-based investment funds” first cited in the Hindenburg Report have ties to the Adani group.

New Delhi: “Associates of the Adani family may have spent years discreetly acquiring stock in the Adani Group’s own companies,” writes The Guardian, citing “offshore financial records seen by it”.

The Financial Times reports that two men linked to Gautam Adani and his brother were using one Global Opportunities Fund in Bermuda “for a specific purpose — to amass and trade large positions in shares of the Adani Group, one of the biggest and most politically connected private conglomerates in India.” The FT concludes that the duo –  “Nasser Ali Shaban Ahli from the United Arab Emirates and Chang Chung-Ling from Taiwan”, associates of Vinod Adani, brother of the conglomerate’s founder Gautam Adani –  had their investments “overseen by a Vinod Adani employee, raising questions over whether they were front men used to bypass rules for Indian companies that prevent share price manipulation”.

This is the first time that potentially controversial owners of Adani stock have been identified since the American short selling firm Hindenburg Research published an explosive report in January that accused the Adani Group of running the “largest con in corporate history”, writes FT. At the time, Adani had denied any wrongdoing.

The paper trail and documents related to today’s news reports were shared with the two newspapers by the Organized Crime and Corruption Reporting Project or OCCRP, a network of investigative journalists, which put out its own story on the specific route and method for investments in offshore companies early this morning.

Following the reports being published, Adani group shares dropped by $4.2bn, or 3.3 per cent, the Financial Times reported.

OCCRP writes that exclusive documents obtained by OCCRP and shared with The Guardian and Financial Times, which it says were 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”.

Modus

OCCRP writes that documents obtained by its reporters reveal how investments were flowing into the Adani Group, involving two of the 13 offshore entities cited in the Hindenburg Report, which were “a pair of Mauritius-based investment funds”.

The two funds, Emerging India Focus Fund (EIFF) and EM Resurgent Fund (EMRF), appear to be typical offshore investment vehicles, operated on behalf of a number of wealthy investors. But documents obtained by reporters show that “a large percentage of the money was placed into these funds by two foreign investors — Chang from Taiwan and Ahli from the United Arab Emirates — who used them to trade large amounts of shares in four Adani companies between 2013 and 2018”.

At one point in March 2017, as per OCCRP, the value of the investments in Adani Group stock was $430 million.

The money followed a convoluted trail, making it exceedingly difficult to follow. It was channelled through four companies: Lingo Investment Ltd (BVI), owned by Chang; Gulf Arij Trading FZE (UAE), owned by Ahli; Mid East Ocean Trade (Mauritius), of which Ahli was the beneficial owner; and Gulf Asia Trade & Investment Ltd (BVI), of which Ahli was the “controlling person”) and the Bermuda-based fund, the Global Opportunities Fund. (See the FT’s chart in tweet below).

OCCRP writes that fund managers in charge of Chang and Ahli’s investments in EIFF and EMRF “received direct instructions on the investments from an Adani company.” It says “an agreement for Excel to provide advisory services to EIFF and EMRF was signed for Excel by Vinod Adani himself in 2011”.

According to documents obtained by OCCRP, these investments resulted in significant profits, netting hundreds of millions over the years as EIFF and EMRF repeatedly bought Adani stock low and sold it high.

Between them, at the peak of their investment in June 2016, the two funds held free-floating shares of four Adani Group companies ranging from 8% to nearly 14%: Adani Power, Adani Enterprises, Adani Ports, and Adani Transmissions.

“Chang and Ahli’s connections to the Adani family have been widely reported over the years. The men were linked to the family in two separate government investigations into alleged wrongdoing by the Adani Group. Both cases were eventually dismissed,” writes OCCRP.

This is connection important, FT explains, because of India’s laws and regulatory framework. “Their relationship to Vinod Adani matters because he is part of the so-called promoter group, an Indian legal term for corporate insiders whose shareholdings are not supposed to exceed 75 per cent under stock market rules. Breaches of the rule can lead to delisting,” the report states.

Reacting to these reports, Hindenburg Research said, “Finally, the loop is closed.”

Response to charges

OCCRP writes that there is no evidence that Chang and Ahli’s money for their Adani Group investments came from the Adani family. “The source of the funds is unknown.”

But documents obtained by OCCRP, they claim, show that Vinod Adani used one of the same Mauritius funds to make his own investments.

A representative of the Adani Group told OCCRP that the Mauritius funds investigated by reporters had already been named in the “Hindenburg report,” referring to the short-seller that sparked this year’s scandal. (The report did name these offshore companies, but did not reveal who was using them to make investments in Adani stock.) The Adani representative also cited the Supreme Court’s expert committee, which described a financial regulator’s efforts to get to the bottom of the matter as “not proved”.

“In light of these facts, these allegations are not only baseless and unsubstantiated but are rehashed from Hindenburg’s allegations,” the representative wrote. “Further, it is categorically stated that all the Adani Group’s publicly listed entities are in compliance with all applicable laws including the regulation relating to public share holdings.”

In comments to The Guardian, Chang said he knew nothing about any secret purchases of Adani stock. He did not say whether he had bought any, but asked why journalists were not interested in his other investments. “We are a simple business,” he said, before ending the interview.

Vinod Adani did not respond to requests for comment. Though the Adani Group has denied that he has a role in running the conglomerate, it admitted this March that he was part of its “promoter group” — meaning he had control over the affairs of the company and was meant to be informed of all holdings in Adani Group stock.

The Wire had reported in March, 2023, on how the Adani group had, after first distancing itself from Gautam Adani’s brother, Vinod, had said, “the Adani Group and Vinod Adani should be seen as one”.

In February, The Wire had reported on Gudami International, a Singapore-based company named in the Hindenburg Research report as being an Adani group “related party” and one that figured in the first chargesheet and second supplementary chargesheet filed by the Enforcement Directorate (ED) in the AgustaWestland helicopter scam, but was then subsequently dropped in the third supplementary chargesheet filed by the ED in 2018, after authorities in Singapore replied to the Letter Rogatory (LR) sent to them by the ED.

Its director was identified as Chang Chung-Ling, who is also a director in other Adani entities. As per the DRI probe, reported by Hindenburg, the registered office address of Adani Global Ltd (later the flagship Adani Enterprises Ltd), in Singapore was also the residential address of Chang Chung-Ling. Vinod Shantilal Shah, director of Adani Global Ltd, and Chang Chung-Ling were shown to be residing at the same address.

Soon after the FT and Guardian reports were published, the Adani Group issued a media statement in which it said these were “recycled allegations”. “These news reports appear to be yet another concerted bid by Soros-funded interests supported by a section of the foreign media to revive the meritless Hindenburg report,” the statement said.

Institutional response

Prime Minister Narendra Modi has been under intense attack for his close personal ties with Adani Group chairman Gautam Adani and has stopped public appearances with Adani since the Hindenburg Report in January termed the group “the largest con in corporate history”.

After the Hindenburg report, the Supreme Court set up an expert committee to look into the allegations. SEBI also was tasked to look into allegations, and earlier this month, on August 25, it submitted its status report to the Supreme Court. PTI reported that SEBI “was still awaiting information from five tax havens on actual owners behind foreign investors investing in the conglomerate.”

In August, news came of Deloitte having resigned as auditor of the Adani Group’s port company, as it wanted a wider remit over other firms in the conglomerate following the Hindenburg report. The resignation came just weeks after Deloitte raised concern over certain transactions flagged in the report on the Adani Group.

A warning ignored

The G20, whose rotational presidency is held by India currently, with the capital dressed up for a summit in September, has also been increasingly talking up the need for a tough stance on money laundering and on opaque offshore funding. At the two-day ninth G20 summit meeting in Brisbane in November 2014, Prime Minister Modi had called for cooperation between nations “to eliminate safe havens for economic offenders”, to “track down and unconditionally extradite money launderers” and to “break down the web of complex international regulations and excessive banking secrecy that hide the corrupt and their deeds.”

However, the OCCRP-FT-Guardian reports say Indian regulators chose to ignore warnings about Adani’s dealings soon after Modi came to power in 2014. The Guardian reports:

“Adani has repeatedly denied that his longstanding connection with the prime minister has led to preferential treatment, as has the Indian government. Yet a document unearthed by the OCCRP and seen by the Guardian suggests the SEBI, the government regulator now in charge of investigating the Adani Group, was made aware of stock market activity using Adani offshore funds as far back as early 2014.

“In a letter dated January 2014, Najib Shah, the then head of the Directorate of Revenue Intelligence (DRI), India’s financial law enforcement agency, wrote to Upendra Kumar Sinha, the then head of the SEBI.

“‘There are indications that [Adani-linked] money may have found its way to stock markets in India as investment and disinvestment in the Adani Group,’ Shah said in the letter.

“He noted that he had sent this material to Sinha because the SEBI was ‘understood to be investigating into the dealings of the Adani Group of companies in the stock market’.

“However, a few months later, after Modi was elected in May 2014, the SEBI’s apparent interest seemed to disappear, a source working for the regulator at the time said.

“The SEBI has never publicly disclosed the warning given by the DRI, nor any investigation it might have conducted into the Adani Group in 2014. The letter appears to misalign with statements made by the SEBI in recent court filings in which it denied there were investigations into the Adani Group before 2020, as well as saying suggestions it had investigated the Adani Group dating back to 2016 were “factually baseless”.”