OCCRP’s Article Provides Fresh Insight: The Powerful Adani Family’s Partners Used ‘Opaque’ Funds To Invest In Its Stocks; Is Sebi’s Inability To Adequately Probe Adani Group Have To Do With Karan Adani’s Father-In-Law Cyril Shroff Who Is Part Of The Committee On Corporate Governance In SEBI?
OCCRP, in its article on Thursday, said Millions of dollars were invested in some publicly traded stocks of India's Adani Group via "opaque" Mauritius funds that "obscured" the involvement of alleged business partners of the Adani family. Citing a review of files from multiple tax havens and internal Adani Group emails, nonprofit media organization OCCRP said its investigation found at least two cases where the investors bought and sold Adani stock through such offshore structures.
The OCCRP Blow To Adani Group
These allegations, which were first raised by a New York-based short seller report, Hindenburg Report, in January, have led to a cascade of consequences, including a drop in Adani Group’s stock prices, public protests, and legal investigations.
Days following the January report, Adani group stocks lost $150 billion in market value and remained down around $100 billion following a recovery in recent months after it repaid some debt and regained some investor confidence.
What Does The OCCRP Report Say
Central to the allegations is the suspicion that some foreign investors holding publicly listed Adani Group stocks were acting as proxies for the company’s majority owners, which could potentially violate Indian securities laws.
The OCCRP report has named two individual investors who made the investments it investigated for its article – Nasser Ali Shaban Ahli and Chang Chung-Ling – described by OCCRP as “longtime business partners” of the Adani family.
The media organization conveyed there was no evidence Chang and Ahli’s money for their investments came from the Adani family. Still, it said its reporting and documents – including an agreement, corporate records, and an email – showed there “is evidence” that their trading in Adani stock “was coordinated with the family.”
“The question of whether this arrangement is a violation of the law rests on whether Ahli and Chang should be considered to be acting on behalf of Adani’ promoters,’ a term used in India to refer to the majority owners of a business,” OCCRP said.
If indeed, OCCRP said, their stake in Adani holdings would exceed the 75% limit allowed for insider ownership.
These documents provide fresh insight into the allegations of stock manipulation, and the two men (Ahli and Chang) who secretly invested in the massive conglomerate turn out to have close ties to its majority owners, the Adani family, thus raising questions about violations of Indian law.
The Response
It should be noted that Ahli and Chang did not respond to OCCRP’s requests for comment, the news article highlighted.
However, in an interview with a reporter from the Guardian, OCCRP stated Chang said he knew nothing about any secret purchases of Adani stock and asked why journalists were not interested in his other investments and said, “We are a simple business.”
Key Highlights
Despite efforts by a high-level expert committee appointed by India’s Supreme Court to investigate the matter, the complexity of offshore structures and the covert nature of these investors made it difficult to definitively establish the facts.
However, exclusive documents obtained by OCCRP reveal that Nasser Ali Shaban Ahli and Chang Chung-Ling, two investors who engaged in trading Adani Group stock, have direct ties to the Adani family; two men who spent years trading hundreds of millions of dollars’ worth of Adani Group stock.
Both Ahli and Chang have served as directors and shareholders in companies affiliated with the Adani family.
Records also show that the investment funds they used to trade in Adani Group stock received instructions from a company controlled by a senior member of the Adani family.
Furthermore, the investment funds used by Ahli and Chang to trade Adani stock were based in Mauritius, an offshore jurisdiction known for its financial secrecy. This allowed them to conduct transactions while keeping their true involvement hidden.
The documents obtained by OCCRP and shared with The Guardian and Financial Times — including files from multiple tax havens, bank records, and internal Adani Group emails — shed light on that very matter.
These documents, which have been 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.
The Close Ties To Vinod Adani
In at least two cases — representing Adani stock holdings that at one point reached $430 million — the mysterious investors turn out to have widely reported ties to the group’s majority shareholders, the Adani family.
The two men, Nasser Ali Shaban Ahli and Chang Chung-Ling, have longtime business ties to the family and have also served as directors and shareholders in Adani Group companies and companies associated with one of the family’s senior members, Vinod Adani.
The documents show that, through the Mauritius funds, they spent years buying and selling Adani stock through offshore structures that obscured their involvement — and made considerable profits in the process. They also show that the management company in charge of their investments paid a Vinod Adani company to advise them in their investments.
Promoters?
One of the key points of concern is whether Ahli and Chang should be classified as acting on behalf of Adani “promoters,” a term used in India to refer to majority owners and affiliated parties of a business.
If established, this could potentially violate Indian laws that limit insider ownership to 75 percent, and might even constitute illegal share price manipulation.
When the company buys its own shares above 75 percent … it’s not just illegal, but it’s share price manipulation,” says Arun Agarwal, an Indian market specialist and transparency advocate. “This way the company [creates] artificial scarcity, and thus increases its share value — and thus its own market capitalization.”
“This helps them gain an image that they are doing very well, which helps them get loans, take valuations of companies to a new high, and then float new companies,” he said.
Adani’s Response
In response to these allegations, the Adani Group has strongly denied any wrongdoing.
They contend that the allegations are baseless and rehashed from the initial report that sparked the controversy. The company has asserted its compliance with all relevant laws and regulations.
Striking Rise Of Adani Group
The trajectory of the Adani Group has been nothing short of remarkable, surging from a market capitalization of less than $8 billion in September 2013 to a staggering $260 billion last year.
This conglomerate boasts an extensive array of ventures spanning transportation, logistics, natural gas distribution, coal trade and production, power generation and transmission, road construction, data centers, and real estate.
Notably, it has secured substantial state contracts, including 50-year agreements to operate and redevelop several of India’s airports. Moreover, it acquired a controlling stake in one of the nation’s few remaining independent television stations.
The Political Dramas And Allegations Of Favouritism
However, Adani’s ascent has not been devoid of controversy. Accusations from opposition politicians about receiving favorable government treatment to secure profitable state contracts have been made along with claims of the company’s close rapport with Prime Minister Modi, fueling debates about undue influence.
Despite these contentions, Adani has refuted any correlation between Modi’s policies and its business success.
Amidst the turmoil, India’s Supreme Court intervened by forming an expert committee to investigate the claims. The committee’s findings, disclosed in May, revealed that the Adani Group had previously faced scrutiny from SEBI, India’s financial regulator.
Role Of SEBI
SEBI had harbored suspicions for years that certain purported “public shareholders” within the Adani Group were, in fact, proxies for Adani promoters. A 2020 investigation by SEBI targeted 13 overseas entities holding Adani stock.
However, these investigations encountered a roadblock, as SEBI struggled to definitively identify the individuals behind these entities due to intricate layers of corporate ownership designed to obscure ownership.
However, the fact that Karan Adani’s Father-In-Law Cyril Shroff Who Is Part Of The Committee On Corporate Governance In SEBI has anything to do with the inability of SEBI to take measures is a relevant question here!
The Web Of Funds
Exclusive documents unearthed by reporters, however, provide insight into the destinations of funds associated with two offshore entities, the Emerging India Focus Fund (EIFF) and EM Resurgent Fund (EMRF).
These funds, based in Mauritius, received substantial investments from foreign investors Chang and Ahli. These investments were channeled into trading substantial volumes of shares in four Adani companies from 2013 to 2018, with a peak value of $430 million in March 2017.
The intricacies of this financial trail involve a network of companies and a Bermuda-based investment fund, the Global Opportunities Fund (GOF). Notably, Chang and Ahli have been connected to the Adani family through prior government investigations, though these cases were ultimately dismissed.
Furthermore, evidence suggests that the trading activities of Chang and Ahli were coordinated with the Adani family. According to a confidential source, fund managers responsible for EIFF and EMRF received direct instructions for investments from an Adani-affiliated company named Excel Investment and Advisory Services Limited. This company operates in a secretive offshore zone in the UAE, complicating transparency efforts.
While the exact source of Chang and Ahli’s funds for their Adani investments remains uncertain, documents indicate that Vinod Adani, a key figure in the Adani family, employed similar Mauritius funds for his investments.
This connection emerged from a letter sent by the Directorate of Revenue Intelligence (DRI) to SEBI in 2014, which suggested that funds from an alleged over-invoicing scheme had entered stock markets related to the Adani Group.
Supreme Court
The complexity of the matter has prompted India’s Supreme Court to direct SEBI to conduct a comprehensive investigation. As the case unfolds, the financial intricacies and legal ramifications of these allegations will continue to reverberate across the corporate landscape in India and beyond
As India’s Supreme Court continues its investigation into the matter and regulators examine the documents, the implications of this case extend beyond the Adani Group.
In Summary
Close Ties to Adani Family: Both Ahli and Chang have strong connections to the Adani family, having served as directors and shareholders in affiliated companies. The documents reveal that the investment funds they used to trade Adani Group stock received instructions from a company controlled by a senior Adani family member.
Opaque Offshore Investment Funds: The investment funds through which Ahli and Chang traded Adani stock were based in Mauritius, an offshore jurisdiction known for its secrecy. These funds allowed them to conduct trades while obscuring their true involvement.
Massive Profits: The documents highlight how these two investors engaged in buying and selling Adani stock through opaque offshore structures, resulting in considerable profits. At one point, the value of the investments in Adani Group stock held by these funds reached $430 million.
Potential Violations of Indian Law: The crucial question raised is whether Ahli and Chang should be considered acting on behalf of Adani “promoters,” which could breach Indian laws that limit insider ownership to 75 percent. If proven, this could constitute illegal share price manipulation.
Adani Group’s Denial: In response to the allegations, the Adani Group has denied any wrongdoing and claimed compliance with all applicable laws. They stated that the allegations were baseless and rehashed from the initial report.
The Last Bit, As India’s Supreme Court continues to investigate the allegations, the outcomes of this case will have significant implications not only for the Adani Group but also for corporate governance, financial regulations, and investor confidence in India’s markets.
