Alleged Covert Investments by Modi-Linked Adani Family Raise Speculation: Document Analysis

Freshly unearthed documents have brought to light a discreet financial maneuver undertaken by a billionaire Indian family, known for its strong affiliations with Prime Minister Narendra Modi. These documents indicate that the family may have covertly injected substantial capital, amounting to hundreds of millions of dollars, into the Indian stock market through the acquisition of its own shares. The intricate web of ties between the family and Prime Minister Modi has come under scrutiny as a result of these revelations.

Offshore Financial Records Suggest Covert Accumulation of Adani Group Shares by Associates of the Adani Family

Offshore financial documents, reviewed by The Guardian, shed light on a covert stock acquisition strategy allegedly undertaken by affiliates of the Adani family. These records imply that over an extended period, associates of the family discreetly amassed shares within the conglomerate’s own enterprises, coinciding with the meteoric ascent of the Adani Group as a preeminent force in India’s business landscape.

As of 2022, Gautam Adani, the founder of the Adani Group, had ascended to become the wealthiest individual in India and the third wealthiest globally, amassing a net worth exceeding $120 billion (£94 billion).

In January, a report released by Hindenburg, a prominent New York-based financial research firm, leveled serious allegations against the Adani Group, asserting that the conglomerate had orchestrated what the report deemed the “most extensive deception in the annals of corporate history.”

The report contended that the Adani Group was involved in what it described as “bold stock manipulation and accounting irregularities,” alongside the utilization of intricate offshore entities to acquire its own shares. These actions were purportedly instrumental in inflating the conglomerate’s market valuation to staggering levels, reaching a zenith of $288 billion in 2022.

In response to the allegations made by Hindenburg, the Adani Group vehemently refuted the claims, asserting their innocence. However, the initial aftermath of these allegations was consequential, resulting in a substantial decline of $100 billion in the conglomerate’s market value. Furthermore, this decline had the effect of displacing Gautam Adani from his prominent position on the list of the world’s wealthiest individuals.

During that period, the Adani Group characterized the research as a “strategically planned assault on India,” and a direct challenge to the “autonomy, credibility, and excellence of Indian establishments.” The group’s response implied that the research was an orchestrated effort aimed at undermining the nation’s institutions and integrity.

However, recently acquired documents obtained by the Organised Crime and Corruption Reporting Project (OCCRP), and subsequently shared with prominent media outlets such as The Guardian and the Financial Times, have unveiled hitherto undisclosed intricacies of an offshore scheme based in Mauritius. This scheme, purportedly overseen by individuals closely associated with Adani, reportedly played a role in bolstering the stock prices of the Adani Group’s array of enterprises. Allegedly, this operation was active between 2013 and 2018.

Until this point in time, the offshore network in question had maintained an inscrutable veil of secrecy. The newly obtained records, however, seem to present compelling substantiation of the purportedly significant involvement of Vinod Adani, Gautam Adani’s elder brother, in the covert offshore activities. It is noteworthy that the Adani Group contends that Vinod Adani is not engaged in the routine operational aspects of the company.

The documents in question explicitly identify two individuals closely associated with Vinod Adani as the exclusive beneficiaries of offshore entities that seem to have facilitated the movement of funds. Furthermore, financial records and corroborating interviews indicate that investments directed towards Adani stocks, originating from two funds situated in Mauritius, were managed under the supervision of a Dubai-centered enterprise. This Dubai-based company is reportedly under the management of an individual known to be affiliated with Vinod Adani.

The revelation of these details carries the potential to yield substantial political ramifications, particularly for Prime Minister Narendra Modi. Modi’s longstanding association with Gautam Adani spanning two decades adds an intricate layer to the unfolding situation.

Following the release of the Hindenburg report, Prime Minister Narendra Modi has encountered challenging inquiries pertaining to the nature of his affiliation with Gautam Adani. Additionally, allegations of potential preferential treatment extended to the Adani Group by his administration have further intensified the scrutiny and questioning directed towards Modi.

Based on a letter discovered by the Organised Crime and Corruption Reporting Project (OCCRP) and reviewed by The Guardian, it appears that the Securities and Exchange Board of India (SEBI) had received substantiating information regarding purportedly dubious stock market conduct by the Adani Group in the early months of 2014. However, following the subsequent election of Prime Minister Modi later that year, there appears to have been a noticeable decline in the regulatory agency’s active involvement and focus on this matter.

Addressing the renewed inquiries surrounding the recently surfaced documents, the Adani Group issued the following statement: “In contrast to your assertion of introducing novel evidence or substantiation, these materials merely recycle unverified claims previously put forth in the Hindenburg report. Our comprehensive response to the Hindenburg report is readily accessible on our official website. It is imperative to emphasize that the allegations levied against the Adani Group and its founders are completely devoid of veracity or factual foundation. We adamantly disavow and dismiss all such assertions.”

The collection of documents unveils a convoluted network of corporate entities with origins tracing back to 2010. This timeline coincides with the initiation of offshore shell company establishment in various international locations including Mauritius, the British Virgin Islands, and the United Arab Emirates. Notably, these endeavors were undertaken by Chang Chung-Ling and Nasser Ali Shaban Ahli, both individuals affiliated with the Adani family.

The financial documents in question seem to delineate that four of the offshore enterprises orchestrated by Chang and Ahli, both of whom have held directorial positions within Adani-associated companies, directed substantial capital amounts, extending into hundreds of millions of dollars, towards a significant investment fund headquartered in Bermuda, known as the Global Opportunities Fund (GOF). This fund then purportedly engaged in investments within the Indian stock market, commencing from the year 2013 onward.

This investment maneuver appears to have introduced an additional level of intricacy, further obscuring the origins of the funds. As per financial records, it is indicated that capital stemming from the offshore enterprises controlled by Chang and Ahli found its way from the Global Opportunities Fund (GOF) into two distinct funds in which GOF held subscriptions: the Emerging India Focus Funds (EIFF) and the EM Resurgent Fund (EMRF).

Subsequently, these aforementioned funds seem to have engaged in a process spanning multiple years, during which they procured shares from four companies affiliated with the Adani Group, all of which are publicly listed entities: Adani Enterprises, Adani Ports and Special Economic Zone, Adani Power, and subsequently, Adani Transmission. The disclosed records provide a unique insight into the mechanics by which funds concealed within intricate offshore frameworks can covertly find their way into the equities of publicly traded Indian corporations.

The investment strategies undertaken by these two funds seem to have been influenced and directed by an investment advisory firm, which is reportedly under the authority of a recognized employee closely associated with Vinod Adani. This advisory company operates out of Dubai.

By May 2014, it becomes evident that the Emerging India Focus Funds (EIFF) held a substantial amount, exceeding $190 million, in shares across three Adani-affiliated enterprises. Concurrently, the EM Resurgent Fund (EMRF) appears to have allocated approximately two-thirds of its portfolio, which equates to around $70 million, towards investments in Adani shares. It’s noteworthy that both of these funds seemingly utilized funds exclusively originating from the enterprises under the purview of Chang and Ahli.

By September 2014, distinct financial records provide insight into a parallel development, indicating that the quartet of offshore companies affiliated with Chang and Ahli had channeled an estimated sum of $260 million into investments within Adani shares through this particular framework.

Subsequent documents exhibit a discernible trajectory of expansion for this investment. By March 2017, it appears that the offshore companies attributed to Chang and Ahli had witnessed the growth of their investments. This growth is evident in the accumulation of $430 million, which effectively constitutes the entirety of their combined portfolio, directed toward investments in Adani company stocks.

Upon being contacted by The Guardian via phone, Chang refrained from engaging in a discussion regarding the documents delineating his company’s investments in Adani shares. Similarly, he declined to respond to inquiries concerning his connections to Vinod Adani. It is noteworthy that neither Vinod Adani nor Ahli provided responses to attempts to establish contact.

The purported offshore activities undertaken by the associates connected to the Adani Group raise concerns regarding potential violations of Indian stock market regulations. These regulations are designed to prevent stock manipulation and to regulate the distribution of public shareholdings in companies.

As per the established regulations, a company is required to maintain a “free float” of 25% of its shares, implying that these shares must be accessible for trading on the stock exchange. The remaining 75% can be held by promoters, who are obliged to declare their direct affiliation with the company. Notably, Vinod Adani has recently been acknowledged as a promoter by the conglomerate.

However, available records indicate that during the zenith of their investment, Ahli and Chang controlled shares ranging between 8% and 13.5% of the free floating shares in four Adani companies via the Emerging India Focus Funds (EIFF) and EM Resurgent Fund (EMRF). If these holdings were to be categorized as being overseen by proxies of Vinod Adani, it would imply that the Adani Group’s promoter holdings potentially exceeded the stipulated 75% threshold.

Political Nexus and Regulatory Oversight

Gautam Adani has faced persistent allegations of capitalizing on his influential political connections. His affiliation with Narendra Modi can be traced back to 2002, during his business endeavors in Gujarat when Modi held the position of Chief Minister in the state. Their trajectories have seemingly progressed in parallel since then. A striking moment occurred after Modi’s victory in the general election in May 2014, as he traveled to Delhi aboard Gautam Adani’s aircraft. This iconic image, in front of the Adani corporate emblem, has become emblematic.

Throughout Modi’s tenure, the ascendancy and influence of the Adani Group have surged, with the conglomerate securing lucrative state contracts encompassing ports, power plants, electricity, coal mines, highways, energy parks, slum redevelopment, and airports. In several instances, legal frameworks were amended to facilitate the expansion of Adani Group entities in sectors including airports and coal. Consequently, the market capitalization of the Adani Group surged from approximately $8 billion in 2013 to an astonishing $288 billion by September 2022.

Despite Adani consistently denying preferential treatment due to his long-standing rapport with the prime minister, a document unveiled by the Organised Crime and Corruption Reporting Project (OCCRP) and reviewed by The Guardian intimates that the Securities and Exchange Board of India (SEBI), the governmental regulatory authority tasked with investigating the Adani Group, was informed about stock market activities linked to Adani offshore funds as early as the beginning of 2014.

A letter dated January 2014, authored by Najib Shah, then-head of the Directorate of Revenue Intelligence (DRI), the financial law enforcement agency of India, was addressed to Upendra Kumar Sinha, the then-head of the SEBI. The communication noted that there were indications of money linked to the Adani Group possibly entering Indian stock markets through investments and divestments within the group. Shah’s letter conveyed this information to Sinha on the premise that SEBI was understood to be examining the dealings of the Adani Group companies in the stock market.

However, several months subsequent to Modi’s electoral victory in May 2014, the apparent interest of the SEBI appeared to wane, as indicated by an individual who was employed by the regulatory body at the time.

Notably, the SEBI has never publicly disclosed the notification issued by the DRI, nor has it acknowledged any investigations it might have conducted into the Adani Group during 2014. The contents of the letter appear inconsistent with assertions made by the SEBI in recent legal submissions, wherein it refuted investigations into the Adani Group before 2020. The SEBI further characterized claims of its inquiry into the Adani Group dating back to 2016 as “factually baseless.”

Critics, legal experts, and the political opposition have voiced concerns over the potential independence of the SEBI – an entity under the jurisdiction of the Modi government – to impartially scrutinize the affairs of the Adani Group.

In May, a report presented to the Supreme Court, which had established an expert committee to investigate the Adani Group following the Hindenburg report’s publication, revealed that the Securities and Exchange Board of India (SEBI) had been examining 13 offshore investors connected to the conglomerate since 2020. The SEBI reportedly encountered challenges in determining potential links between these investors and the Adani Group, with specific focus on entities like EIFF and EMRF, two of the funds under investigation.

The regulatory authority has faced accusations of sluggishness in their investigation into possible transgressions by the Adani Group, having sought multiple extensions. Just recently, the SEBI submitted a report to the Supreme Court, asserting that their investigations were in the final stages, though no findings were disclosed.

In response to the imminent publication of this article, the Adani Group issued a statement expressing concern over the timing of the release, considering the allegations are already under the scrutiny of SEBI, which is nearing the conclusion of its investigation. The group claimed that such publication seemed designed to malign, diminish value, and cause detriment to both the Adani Group and its stakeholders. Furthermore, the statement stressed the compliance of all publicly listed entities within the Adani Group with pertinent laws, encompassing regulations regarding public shareholding and the Prevention of Money Laundering Act (PMLA).

A spokesperson representing the two funds, EIFF and EMRF, which invested in Adani stocks, refuted any allegations of misconduct. They emphasized that the funds had been engaged in diverse investments across various asset classes, including equities, mutual funds, alternate investment funds, and bonds. These funds, including EIFF and EMRF, received subscriptions from the Global Opportunities Fund Limited (GOF), which had been declared as a broad-based fund. The spokesperson noted that GOF had fully redeemed its participation in EIFF by March 2019 and in EMRF by March 2020.

As of now, the SEBI has not responded to requests for comment regarding these developments.