New Delhi: Six out of eight Bermuda and Mauritius-based public funds that were alleged to have been used by individuals connected to the Adani Group to purchase shares of the conglomerate’s listed companies have been closed, Mint has reported, citing regulatory filings in these countries.
Mint reported that two Mauritius-based funds were shuttered last year, and a third is in the process of winding up. This follows the initiation of an investigation by the markets regulator into offshore entities’ holdings in Adani group companies in 2020, said the newspaper.
This development presents a challenge for the Securities and Exchange Board of India (SEBI) in identifying the ultimate beneficiaries of these investment entities.
The Organized Crime and Corruption Reporting Project (OCCRP), a global network of investigative journalists, recently reported that two men who secretly invested in the Adani Group turn out to have close ties to its majority owners, the Adani family, raising questions about violations of SEBI’s rules on free float norms.
The two men – Nasser Ali Shaban Ahli and Chang Chung-Ling – spent years trading hundreds of millions of dollars’ worth of Adani Group stock, said the OCCRP report.
“Both have close ties to the Adani family, including appearing as directors and shareholders in affiliated companies,” it said.
The report, however, mentions “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 show that Vinod Adani used one of the same Mauritius funds to make his own investments.”
The OCCRP shared its findings with The Guardian and Financial Times.
Adani Group has denied all these allegations.
“We categorically reject these 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. In fact, this was anticipated, as was reported by the media last week,” the company said in a statement.
Also read: Adani’s Acquisitions: Why India Needs to Keep Track of the Costs
A possible violation of free float norms?
The allegations were based on the suspicion that certain prominent “public” investors of the Adani Group were actually individuals closely associated with the group itself. If proven true, this would have violated SEBI’s rules on minimum public shareholding norms.
According to SEBI rules, a listed company has to ensure that 25% of its shares remain as free float. These shares are readily available for trading in the stock market. So, the promoters can hold only 75% of the shares. This means free float excludes promoters’ holding.
A violation of free float norms can lead to delisting of the company from the stock exchanges.
This is what happened with Patanjali Foods.
On March 15, stock exchanges froze the promoter shareholding of Patanjali Foods after the company failed to meet the 25% public shareholding within the stipulated time period. According to Business Standard, the promoter stake in the Baba Ramdev-backed company is currently at 80.82%.
The company had planned to dilute 6% stake to meet minimum public shareholding norms of 25%.
Also read: Adani’s Acquisitions: The ‘Inorganic Strategy’ Behind the Purchase of Gangavaram Port
The shuttered offshore funds
Mint cited several names of some these closed funds, which would have helped the regulator in its quest to find the ultimate beneficiary and therefore helped in its investigation.
SEBI has been investigating whether the Adani Group violated any rules concerning minimum public shareholding, related party transactions and manipulation of stock prices, as alleged in the report published by US-based short seller Hindenburg Research.
According to the business daily, the Bermuda-registered Global Opportunities Fund, registered on January 6, 2005, was shut on December 12, 2006, according to regulatory filings in the island country.
Mauritius-based Assent Trade and Investment Pvt. Ltd, set up in April 2010, turned defunct in June 2019. Lingo Trading & Investment Pvt Ltd, incorporated in December 2009, closed in March 2015. Mid East Ocean Trade & Investment Pvt. Ltd was set up in September 2011 and closed in August last year.
EM Resurgent Fund was set up in May 2010 and shut down in February last year. Asia Vision Fund, set up in May 2010, appointed liquidators on 20 April 2020 and is in the process of winding up, according to filings reviewed by Mint.
A seventh fund, Emerging India Focus Funds, which was set up on May 19, 2008, continues to be active. Details pertaining to Gulf Asia Trade and Investment, registered out of the United Arab Emirates, could not be ascertained.
Also read: Fresh Adani Revelations That Hint at Regulator SEBI Inaction Could Hurt India’s Fatf Credibility
The DRI letter to SEBI
What stands out in the OCCRP report is that SEBI had in January 2014 received a letter from the Directorate of Revenue Intelligence (DRI), a federal anti-smuggling agency, on a case the latter was investigating.
OCCRP reported that the DRI had evidence that money from the alleged over-invoicing scheme it was investigating had been sent to Mauritius.
“There are indications that a part of the siphoned-off money may have found its way to stock markets in India as investment and disinvestment in the Adani Group,” wrote Najib Shah, the DRI’s director general at the time, in the letter to then SEBI chief U.K. Sinha.
According to the DRI case, money from the alleged scheme was sent to an Emirati company called Electrogen Infra FZE. This company then forwarded the resulting proceeds of about $1 billion to a Mauritius-based holding company ultimately owned by Vinod Adani that had a similar name, Electrogen Infra Holding Pvt. Ltd.
Reporters were able to trace the onward flow of over $100 million of these funds.
The Mauritius company loaned the money to another Vinod Adani company, Assent Trade & Investment Pvt Ltd, “to invest in [the] Asian equity market.”
As the beneficial owner of both Electrogen Infra Holding and Assent, Vinod Adani signed the loan document as both the lender and as the borrower.
Finally, the money was placed into the GOF, the same intermediary used by Chang and Ahli, and then invested in both EIFF and Asia Vision Fund, another Mauritius-based investment vehicle, the OCCRP report said.
However, it is unclear whether Sinha acknowledged the letter, let alone acted on it, Scroll.in reported.
“You should not expect me in all fairness to remember everything what happened nine years ago, given that I retired from SEBI six years ago,” Sinha told Scroll.in, when asked about the DRI letter. “I don’t recollect what the facts are.”
In March this year, Sinha was appointed as non-executive chairman and additional director for NDTV till March 26, 2025. Adani Group is a majority shareholder in NDTV.