Strange report briefly shakes Adani group
THE ADANI GROUP underpins entire swathes of the Indian economy. The activities of the family conglomerate include airports, energy and natural resources, among other critical infrastructure. Its founder, Gautam Adani, is the 14th richest man in the world, with a value of $ 72 billion, according to Bloomberg. In terms of his perceived ability to navigate India’s treacherous legal landscape and impenetrable red tape, he’s in the same league as another (slightly richer) billionaire, Mukesh Ambani.
So when the share prices of the six listed entities of the Adani Group plunged on June 14, heads turned. That day on Economic times, an Indian newspaper, reported that the National Securities Depository, which clears stock transactions, has frozen shares held by three Mauritius-based funds due to insufficient information about their underlying investors. All three funds were registered at the same address and together appear to hold around $ 6 billion in Adani Group assets. The news that a substantial part of the float of the Adani group companies could no longer be traded sparked a wild trade in the part that could still be traded. Company stock prices have fallen 5-25%.
The Adani group immediately issued a statement calling the story “patently flawed”. It was confirmed after the clearinghouse clarified that the funds were in fact not frozen. The stocks concerned have largely recovered their losses. Brokerage firms have rushed to issue reports pointing out that the bizarre moves in stock prices do not reflect a change in the group’s outlook, which looks promising. Mr. Adani’s companies recently won big contracts to run airports and harness energy fields. The group has giants like Total, a French oil supermajor, and the Qatar sovereign wealth fund as junior partners in various joint ventures. The combined market value of the six listed subsidiaries of the Adani Group has more than quadrupled in the past year, to reach $ 115 billion (see chart), propelling Mr. Adani past Chinese tycoons to second place on the rich list of Asia, behind Mr. Ambani.
It wasn’t the end of the confusion, however. In a regulatory filing on June 15, the Adani group noted that some operations in the three Mauritius funds had in fact been suspended due to an order issued several years ago. He gave no details about the suspension. This in turn has put the language into the chatty business world of India. Some have questioned whether this is a sign of a regulatory crackdown on plutocrats of the type currently underway in China. Others recalled a report released in April by the Morning background, an economic information site, on the strong exposure of the three Mauritian funds to the Adani group.
The episode also drew renewed attention to an oddity in Indian corporate ownership – and its uncertain future. To deal with India’s extensive, confusing and intrusive tax regime, foreign investors have been investing in the country for years through Mauritius, which has a tax treaty with India. This pact has been amended over time. In February 2020, a further change allowed Indian authorities, concerned that Indian citizens are using the island to evade Indian taxes, to access investor lists of funds registered in Mauritius. This time, the story of a trade freeze may have been screwed up. Another time, for one company or another, it may not be the case. ■
This article appeared in the Business section of the print edition under the title “Court circuit”