Delhi: A report prepared by the New York-based short-selling firm Hindenburg Research created ripples in the Indian corporate world and rocked its stock markets like never before.
Adani group of companies and its owner Gautam Adani were at the centre of the storm that shook the political establishment too. But the information unearthed by the US firm seems to be the tip of the iceberg.
If a recent report by US media giant Forbes is to be believed, the Adani group controlled several shell companies, siphoned off billions of dollars, pumped money into its Indian entities illegally and held information from the regulators. Gautam Adani’s brother Vinod was at the vortex of these operations.
Vinod Adani is a man who keeps himself away from the media glare and limelight, prefers to remain in the shadow of his brother and works silently. He holds a Cypriot passport, has his residence in Singapore and has spent a large part of his life abroad.
But he also holds many offshore firms in tax havens like Mauritius, the Cayman Islands, the Bahamas, the Virgin Islands, and the United Arab Emirates. He has used these bases for investing money into Indian companies, avoiding taxes, and withholding information from the Securities and Exchange Board of India and other government agencies, that too preferred to look the other way.
The report published by Hindenburg Research says that Vinod Adani, “Manages a vast labyrinth of offshore shell entities,” that have, “Collectively moved billions of dollars into Indian Adani’s publicly listed and private entities, often without required disclosure of the related party nature of the deals.”
By doing this, Vinod Adani has helped the Adani Group evade Indian laws that require at least 25% of a company’s publicly traded stock to be owned by non-insiders.
The Adani Group hit the headlines in 2022 when it bought the Swiss company Holcim’s stakes in its Indian cement giants Ambuja Cements Ltd and ACC Ltd for USD 10.5 billion. With this takeover, the Adani Group became the second-largest cement company in the country.
It is interesting to note that Vinod Adani’s company Endeavour Trade and Investment Ltd served as the acquisition vehicle for this takeover.
But other dealings and investments of Vinod Adani are not this much transparent.
According to the Forbes report, Vinod Adani’s company Singapore-based Pinnacle Trade and Investment Pte. Lte., took a loan of USD 263 million from Russia’s government-controlled VTB Bank. But out of the borrowing, Pinnacle gave away USD 258 million to an unnamed firm.
Pinnacle pledged two investment companies-Afro Asian Trade and Investment Ltd and Worldwide Emerging Market Holdings Ltd as guarantors for the same loan.
It is interesting to know that Vinod Adani owns Mauritius-based Acropolis Trade and Investments Limited, which holds 100% stakes in Worldwide Emerging Market Holdings Ltd.
These two companies, Afro Asian Trade and Investment Ltd and Worldwide Emerging Market Holdings Ltd, are large Adani Group shareholders. They hold about USD 4 billion worth of shares in Adani Enterprises, Adani Power, Adani Ports and Adani Transmission. These two companies are also the promoter entities of these firms.
These offshore companies were pledged by Pinnacle for the VTB Bank loan.
But, neither Afro Asian Trade and Investment Ltd nor Worldwide Emerging Market Holdings disclosed the share pledge for the four Adani Group companies.
Actually, Pinnacle pledged these offshore funds instead of the Adani Group shares to secure the Russian loan so that they might enjoy the exemption of the obligation of disclosing the pledged share.
The SEBI was in complete oblivion of these pieces of information and developments till recently. The regulator came out of its slumber after the Hindenburg Report and the subsequent hullabaloo.
The regulator told the Supreme Court last Monday that it was “enquiring into both the allegations made in the Hindenburg report as well as the market activity immediately preceding and post the publication of the report.”
Indeed, but only after the opposition rocked the Parliament for several days on this issue.
Vakodar Investment, a Cyprus-based company owned by Vinod Adani received a loan of USD 230 million from Vinod and an offshore firm in Dubai. But immediately after that, it purchased the convertible debentures of Adani Estates and Adani Land Developers.
Convertible debentures are loan instruments that pay interest at a fixed rate for a fixed period and get converted into equity of the company at a fixed date.
The two firms are subsidiaries of another group company Adani Infrastructure and Developers.
Adani Infrastructure and Developers was a subsidiary of Adani Enterprises, the publicly-traded and flagship company of the group. But Adani Enterprises revealed in its 2013 annual report that it had sold the company in June 2012 with a profit of USD 8.15 million.
It may appear bizarre, but Adani Enterprises in its annual report of 2017 mentioned Adani Infrastructure and Developers as its ‘related enterprise.’ In other words, the company became a ‘related enterprise’ of Adani Enterprises four years after it was sold.
It raises the question if the reported profit from the sale of the company was genuine or whether it was window dressing.
If the Forbes report is to be believed, the Adani family controlled Adani Infrastructure and Developers in 2017 through another group company Adani Properties.
The SB Adani Family Trust, Gautam Adani’s son Karan Adani and Adani Commodities own Adani Properties. Adani Commodities is a subsidiary of Adani Enterprises. So, Adani Enterprises owns, at least partially, the company it sold in 2012.