A non-profit global network of investigative journalists, Organised Crime and Corruption Reporting Project (OCCRP), says in an article crores of rupees were invested in listed stocks of India's Adani group via 'opaque' funds from Mauritius that 'obscured' the involvement of alleged business partners of the Adani family. OCCRP also reported that two men, Nasser Ali Shaban Ahli (Nasser) of the United Arab Emirates (UAE) and Chang Chung-Ling (Chung-Ling) (Chinese/Taiwan), who are treated as public investors in stock exchange filings, are actually Adani insiders which is a violation of Indian laws. This also reduced the free float of the stock, helping to manipulate the prices with less funds.
Documents
obtained by OCCRP and shared with The Guardian and Financial Times include files from several tax havens, internal emails from the Adani group and bank records. It is reported that the documents have been verified by people who have direct knowledge of Adani's business. All the listed companies from the Adani group are trading in red on Thursday.
The key finding of the OCCRP report is that the "investment funds they (Nasser and Chung-Ling) used to trade in Adani group stock received instructions from a company controlled by a senior member (Vinod Adani) of the Adani family".
This report further establishes the brazen stock manipulation allegations made by Hindenburg's report in January 2023. The OCCRP report also mentions the "group's widely perceived closeness to prime minister (PM) Narendra Modi and its central role in his plan for developing the country."
The OCCRP report shows that Adanis are in violation of the rule called MPS (minimum public shareholding) implemented by the Securities and Exchange Board of India (SEBI) in 2010. According to this rule, companies with more than 75% stake in the company must bring it down to a maximum of 75%, with the rest being classified as public shareholding. That is, 25% of the shareholders of a listed entity must be public shareholders. This increases the free float in the stock and, in turn, gives more leverage to public investors. But to increase the market capitalisation of the company by reducing free float, the majority stakeholders may resort to some illegal tactics creating artificial scarcity and thus indulge in share price manipulation. Higher valuation helps companies to get more loans. This is the case with the Adani group as per the
Hindenburg report and now further asserted by OCCRP. They claim that, with the help of several offshore entities, the group has increased promoted holding to nearly 85% which is blatantly illegal.
It may be recalled that the Hindenberg allegations attracted an unusual public interest litigation (PIL), which was promptly admitted in the Supreme Court, which formed a committee to go into the allegations. The committee could not identify the investors with the help of agencies contacted as they are hidden behind secretive offshore structures. Throughout the episode, the market regulator seemed clueless about the allegations, too, when it has all the powers to summon witnesses and ask for information.
Now, the documents obtained by OCCRP have established a deeper link. As per the committee report, SEBI suspected for years "some of (Adani group's) public shareholders are not truly public shareholders, and they could be fronts for promoters".
Now, OCCRP has found the destination of two of these 13 funds. It claims that the document reveals these two (Nasser and Chung-Ling) investors invested large funds in the Emerging India Focus Fund (EIFF) and EM Resurgent Fund (EMRF), which are two of the 13 overseas entities between 2013 and 2018. Their (Nasser and Chung-Ling) holding reached US$430mn (million) at one time in March 2017, and the fund was channelled through four companies and a Bermuda-based Global Opportunities Fund (GOF).
The four companies used in the investments were Lingo Investment Ltd (BVI), owned by Chung-Ling; Gulf Arij Trading FZE (UAE), owned by Nasser; Mid East Ocean Trade (Mauritius), of which Nasser was the beneficial owner; and Gulf Asia Trade & Investment Ltd (BVI), of which Nasser was the "controlling person."
OCCRP has also revealed that EIFF and EMRF made significant profits by repeatedly buying low and selling high. Further, in June 2016, these funds reportedly held a stake of 8% to 14% in four Adani group companies - Adani Power, Adani Enterprises, Adani Ports and Adani Transmission.
According to OCCRP, the fund managers in charge of Chung-Ling and Nasser's investments in EIFF and EMRF received direct instructions on the investments from an Adani company. The company that the source identified was "Excel Investment and Advisory Services Ltd, which is based in a secretive offshore zone in the United Arab Emirates where corporate records are not available".
The OCCRP report further revealed that the document obtained corroborates the source's account. It says:
• "An agreement for Excel to provide advisory services to EIFF and EMRF was signed for Excel by Vinod Adani himself in 2011.
• As recently as 2015, Excel was owned by a company called Assent Trade & Investment Pvt Ltd., which a 2016 email stated was ultimately owned by Vinod Adani and his wife.
• Though current corporate records from Mauritius, where Assent is registered, do not show who owns the company, they do show that Vinod Adani is on its board of directors.
• Invoices and transaction records show that the management companies of EIFF, EMRF, and the Bermuda-based GOF paid over $1.4 million in "advisory" fees to Excel between June 2012 and August 2014.
• An internal email exchange suggests that, in connection with an upcoming audit, fund managers were concerned that they didn't have sufficient paperwork to justify following Excel's investment advice. In one of the emails, a manager instructs several employees to produce records that would justify the reasoning behind the investments. In another, a manager makes a request to obtain a report from Excel which should recommend investing in "more than the number of securities into which the fund has [actually] invested so that it can be demonstrated that the [investment manager] used their discretion to make the selection of investments".
OCCRP has also mentioned 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 the Mauritius fund is a common link between Vinod Adani and the same fund. OCCRP's reporters obtained a letter from SEBI, the Indian regulator, received from the department of revenue Intelligence in 2014, in which the directorate of revenue intelligence (DRI) said it 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.
The OCCRP report also includes that, as per 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 US$1bn (billion) to a Mauritius-based holding company ultimately owned by Vinod Adani that had a similar name, Electrogen Infra Holding Pvt Ltd. It traced the onward flow of $100mn of these funds. The Mauritius company loaned the money to another Vinod Adani company, Assent Trade & Investment Pvt Ltd, "to invest in Asian equity market." The loan document was signed by Vinod Adani as both the lender and borrower (as he was the beneficial owner of both Electrogen Infra Holding and Assent), the report says.
As per OCCRP, "Finally, the money was placed in GOF, same intermediary used by Chung-Ling and Nasser, and then invested in both EIFF and Asia Vision Fund, another Mauritius-based investment vehicle".
In response to the OCCRP report, an Adani group representative cited Supreme Court expert committee findings about the allegations against the Adani group as "not proved". It, in turn, alleged that OCCRP's facts "are not only baseless and unsubstantiated but are rehashed from Hindenburg's allegations".
"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 shareholdings."
Nasser and Chung-Ling did not respond to OCCRP's request for comment.
Chung-Ling was mentioned four times in Hindenburg's report, first in relation to an entity called Gudami International as a director. As per Hindenburg's report citing Adani Enterprises' own disclosure of 2002, Chung-Ling is a related party.
Why is Gudami important? It came to the limelight in 2018 as it was named one of the three Singaporean firms involved in the Augusta Westland VVIP helicopter scam. Further, it is also an investor in many funds of Monterosa Investment Holdings which, in turn, has invested in multiple entities of the Adani group with a stake worth around US$4.5bn.
Again, in the Hindenburg report, Chung-Ling is mentioned with respect to the relation with Growmore Trade and Investment, which later merged with Adani Power in 2021, making a profit of US$423mn. The report alleged it as a 'windfall gain to an opaque private entity controlled by a close associate of the Adani family'.
As per the same report, PMC Projects is owned by Chung-Ling's son. Adani group was asked whether PMC Projects is a dummy firm affiliated with the group itself. Adani refused any links between PMC and the group by citing DRI records from 2017. But the same DRI, in a 2007 investigation into an illegal diamond trading scheme, found that Chung-Ling shared a Singapore residential address with
Vinod Adani (elder brother of Gautam Adani). In the same scheme, Chung-Ling was the director of three Adani companies while Nasser was found to represent a trading firm involved in the case.
In a separate 2014 case, DRI investigation revealed there was an alleged over-invoicing scam. DRI claimed Adani was illegally funnelling money out of India by overpaying its own foreign subsidiary by around $1bn. Chung-Ling and Nasser's name also appeared in the case. They were the directors of two companies which were later owned by big brother Vinod Adani who managed the proceeds in the UAE and Mauritius company.
OCCRP's earlier projects include the Pegasus Project, Pandora Papers, Panama Papers, and Russian Asset Tracker. OCCRP is a global network of investigative journalists with staff on six continents. It was founded in 2006 and specialises in reporting on organised crime and corruption.
On the allegations of OCCRP, Adani group says, "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. These claims are based on closed cases from a decade ago when the Directorate of Revenue Intelligence (DRI) probed allegations of over-invoicing, transfer of funds abroad, related party transactions and investments through FPIs."
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