In its report, Hindenburg had made several allegations relating to offshore entities, and had raised several questions for the Adani Group. It has stated that Adani family members allegedly operated offshore shell entities in tax havens such as Mauritius, UAE and the Caribbean Islands, and that they allegedly generated false import, export documentation to generate fake, illegitimate turnover and siphon money off the listed companies.
Hindenburg also alleged that Adani Group chairman Gautam Adani’s younger brother Rajesh Adani and brother-in-law Samir Vora played key roles in the diamond trading import, export scheme around 2004-05 that involved the use of offshore entities to generate artificial turnover. The report, however, reserved the more severe allegations for Gautam Adani’s elder brother Vinod Adani, who, it said, was key in managing a network of offshore entities to facilitate fraud. It said Vinod Adani through close associates, “manages a vast labyrinth of offshore shell entities”.
The report further claimed that it has identified 38 Mauritius-based shell companies that are allegedly controlled by Vinod Adani or close associates, and more that are “surreptitiously controlled” by him in Cyprus, UAE, Singapore and several Caribbean Islands. Many of these companies have no “obvious” signs of operations, Hindenburg alleged, with no reported employees, independent addresses, phone numbers of online presence. “Despite this, they have collectively moved billions of dollars into Indian Adani publicly listed and private entities, often without required disclosure of the related party nature of the deals,” it alleged. Vinod Adani shells, according to Hindenburg, serve a few functions including stock parking and manipulation, and money laundering “through Adani’s private companies onto the listed companies’ balance sheets in order to maintain the appearance of financial health and solvency”.
It also alleged that offshore shells and funds tied to Adani Group comprise many of the largest ‘public’ holders of Adani stock, which could lead to delisting of Adani companies if SEBI rules were to be enforced.
Late Sunday evening, the Adani Group issued a 413-page response to the Hindenburg report, saying the short-seller had made misleading claims and statements around offshore entities without any understanding of the Indian laws around related parties and related party transactions. The conglomerate said Hindenburg’s statements and queries were without any evidence and were purely ‘unsubstantiated speculations’.
Here’s what the Adani Group said in response to allegations on offshore entities among others:
Allegation: Hindenburg stated that certain offshore entities that held concentration positions in Adani stock accounted for up to 30-47 per cent of the yearly delivery volume in Adani stocks. Citing their analysis, it termed it a massive irregularity, and sought an explanation from Adani on the trading volume from this concentrated group of offshore funds. It also said that the nature of trading suggests that these entities are involved in manipulative wash trading and sought Adani’s response.
Adani response: Adani Group said that the entities referenced are public shareholders in the listed companies. “Innuendoes that they are in any manner related parties of the promoters are incorrect,” it said, further adding that they have no control over who buys, sells or owns the publicly-traded shares or how much volume is traded. It said that it has no control over the source of funds for such public shareholders and is not required to have such information. The conglomerate refrained from commenting on trading patterns or behaviour of public shareholders.
Allegation: The Hindenburg report raised questions on Adani’s close association with Amicorp despite its proximity to the 1MDB international fraud scandal. It said Amicorp established seven of Adani’s promoter entities, at least 17 offshore shells and entities associated with Vinod Adani and at least 3 Mauritius-based offshore shareholders of Adani stock.
Adani response: Adani Group responded that Amicorp is a recognised firm that provides secretarial services to various companies, including Adani. It said that it is not concerned with the “unrelated scandals”, and accused Hindenburg of building a false narrative. It asked Hindenburg to write to Amicorp for a response if it wishes to seek clarification about the scandal they believe Amicorp is involved in.
Allegation: Hindenburg alleged that Trustlink CEO, who has been alleged by the Department of Revenue Intelligence (DRI) for involvement in a fraud using shell companies with Adani often touts its close relationship with Adani. It asked for the full details of the CEO’s dealings with Adani Group.
Adani response: The conglomerate said that Trustlink provides secretarial services to various entities and not just Adani. It further added that the Trustlink CEO is not a director in any of the Adani entities. The company also took a jibe at Hindenburg and said that it took an individual’s job listing on LinkedIn as “touts” a “close relationship”. It said that Hindenburg lacks an understanding of laws in relevant jurisdictions.
Allegation: Hindenburg Research questioned the role of Vinod Adani, Gautam Adani’s elder brother, who it accused of running a network of shell entities. It asked the company to give details of the extent of Vinod Adani’s role in the company, deals and entities. It further asked the company to reveal the number of Adani entities that Vinod Adani is a either a director, shareholder or beneficial owner, and sought the details of Vinod Adani-associated entities’ dealings with private and listed entities in the Adani empire. It further asked the company to elaborate the functions of the 13 websites that were formed on the same day with the same set of “nonsensical services”. It also said, “One of the websites for a Vinod Adani-associated entity claimed “we trade in Services such as sale and delivery of an intangible product, like a Service, between a producer and consumer.” What does that even mean?”
Adani response: For all the five questions, the conglomerate had a common response. It said that Vinod Adani does not hold any managerial position in any of the Adani listed entities or subsidiaries. It said that Vinod Adani has no role in the day-to-day affairs of the company, and hence these questions bear no relevance. The Adani Group added that it is not in a position to comment on Hindenburg’s allegations on Vinod Adani’s business dealings or transactions.
It further added that all transactions by the Adani portfolio companies have been duly identified and disclosed as related party transactions in compliance with Indian laws.
Allegation: Hindenburg questioned the portion of Adani Green Energy that were sold to offshore entities including Mauritius and Cypriot entities named in its report. It sought the details of the full list of offshore entities that participated in the OFS deals. It also questioned Group CFO Robbie Singh’s statements on June 16, 2021, when he said that the funds like the Mauritius shareholders had not made fresh investments and had come to own shares of other Adani stocks through vertical demergers. It said that evidence showed otherwise.
Adani response: The Adani Group gave a common response to all the three allegations. It said that these allegations emerge from a lack of understanding of Indian laws. Under Indian laws, all listed entities are required to have a public shareholding of minimum 25 per cent. Shares of AGEL were listed after the demerger from AEL in June 2018, and the company was required to comply with the regulations within 12 months from the date of listing.
“The process for OFS is a regulated process implemented through an automated order book matching process on the platform of the stock exchange. This is not a process which is controlled by any entity and the purchasers are not visible to anyone on the platform,” it said, further adding that this process is not controlled by the seller or the buyer. The purchaser of securities is also not visible to the seller on the stock exchange platform, it said. The company said that the shareholding pattern of AGEL, both pre- and post-completion of offerings for sale are already disclosed to the exchanges.