Recent findings have shed light on allegations of stock manipulation within India’s Adani Group, one of the nation’s largest conglomerates, spanning various sectors from airports to television stations. These allegations surfaced earlier this year following claims by a New York-based short seller and led to a significant drop in Adani’s stock prices, sparking protests and an investigation by India’s Supreme Court.
The core accusation centered on the notion that some of the Adani Group’s key “public” investors were, in fact, insiders connected to the group, potentially violating Indian securities laws. However, due to the use of secretive offshore structures, the investigators were unable to identify these investors.
Exclusive documents obtained by the Organized Crime and Corruption Reporting Project (OCCRP) have now shed light on these elusive offshore transactions. These documents, corroborated by individuals familiar with the Adani Group’s business and public records from multiple countries, reveal how hundreds of millions of dollars were invested in Adani’s publicly traded stocks through opaque investment funds located in Mauritius.
Two prominent investors, Nasser Ali Shaban Ahli and Chang Chung-Ling, are shown to have had significant involvement in Adani stock trading through these Mauritius funds. Both individuals have established connections with the Adani family over the years, including serving as directors and shareholders in Adani Group companies and those associated with Vinod Adani, a senior member of the Adani family.
The documents demonstrate that these investors, through the Mauritius funds, engaged in years of buying and selling Adani stock through offshore structures designed to conceal their participation. They not only made substantial profits but also reveal that a management company overseeing their investments paid a Vinod Adani company for advisory services.
The critical legal question revolves around whether Ahli and Chang should be considered representatives of Adani “promoters”, a term used in India to denote majority owners and affiliated parties. If they are deemed as such, it would imply that insiders collectively owned more than the 75 percent limit imposed by law, which could constitute illegal share price manipulation.
This manipulation, if proven, can artificially inflate a company’s share value and market capitalization, enhancing its image and facilitating access to loans and higher valuations for subsidiary companies.
In response to these allegations, a representative of the Adani Group referred to previous mentions of the Mauritius funds in the “Hindenburg report,” the initial source of the scandal. However, the report did not disclose who was behind these offshore entities. The representative also cited the Supreme Court’s expert committee, which found that a financial regulator’s efforts to investigate had not yielded conclusive evidence.
The Adani Group has witnessed remarkable growth, increasing its market capitalization from under US$8 billion in September 2013 to US$260 billion last year. The conglomerate operates across diverse sectors, including transportation, natural gas distribution, coal trade, power generation, and more. It has secured significant state contracts and has been central to India’s development plans.
Yet, its ascent has not been devoid of controversy. Opposition politicians have alleged that the Adani Group received preferential treatment from the government, and some analysts suggest a close relationship between the group’s chairman, Gautam Adani, and Prime Minister Narendra Modi. Adani has denied these claims and attributed his success to factors other than government support.
The conglomerate faced a substantial setback earlier this year when Hindenburg Research released a report accusing the group of stock manipulation and accounting fraud. Share prices plummeted, and Gautam Adani’s wealth substantially declined.
India’s Supreme Court formed an expert committee to investigate these allegations, revealing that SEBI, India’s financial regulator, had long suspected that some public shareholders of the Adani Group were not genuine public shareholders but potentially fronts for Adani insiders.
However, SEBI’s investigation faced challenges in conclusively identifying the individuals behind these transactions due to the complexity of offshore corporate structures.
Recently obtained documents detail two Mauritius-based investment funds, Emerging India Focus Fund (EIFF) and EM Resurgent Fund (EMRF), where significant investments were funneled. These funds, at their peak, held substantial shares in Adani Group companies. Furthermore, Chang and Ahli, the primary investors in these funds, have historical links to the Adani family.
The documents also reveal that Vinod Adani, a senior Adani family member, utilized one of these Mauritius funds for his investments, further implicating ties between insiders and the offshore transactions. The source of the funds for these investments remains unclear.
In light of these developments, SEBI has been directed to investigate the matter further, with its report expected in the coming months.
