Adani Group in Hot Water over OCCRP Report

The year 2023 is not a good year for the Adani Group. With January bringing a stinging report on accounting fraud, stock manipulation, and whatnot, the group had it tough anyway. Then, as it tried to slowly breathe life back into its crumbling castle by initiating new projects, on August 31st, a strong wave of allegations brought the Adani Group on the verge of being blown away (AGAIN!). First, it was the Hindenburg Research Report, and now it's a new report by OCCRP!

Organised Crime and Corruption Reporting Project, an investigative journalism platform founded in 2006, revealed some new findings about the Adani Group, which almost everyone believes. After all, once a cheater, always a cheater, if I may quote Rachel Green.

With the onslaught of fresh allegations on Gautam Adani-led group, it's like a repeat telecast from seven months prior. Adani Group's stock price is falling; their market capitalisation fell rapidly by over ₹35,000 crore in just one day. Even the company's auditor, Deloitte, quit a few days ago, stating their suspicion of the company's related party transactions. It's a celebration for all holding their breaths to watch Adani's downfall.

Nonetheless! The damage of the report is much visible despite Gautam Adani & Group rejecting these allegations. Even SEBI is taking note of the newly released report and turning its investigations in that direction. This makes one wonder what exactly the deal is with this report and how a few words can cause such drastic damage to a big conglomerate like the Adani Group.

In this article, we will be discussing what negative effects the company is facing due to the report. Plus, we will analyse the difference between the Hindenburg and OCCRP reports.
 
Let’s begin!

What Did the OCCRP Report Reveal?

The OCCRP report was published in The Financial Times and The Guardian, which included two Mauritius-based funds, the Emerging India Focus Fund (EIFF) and the EM Resurgent Fund (EMRF), investing and trading in large volume in four Adani companies. In simple words, the report calls out the group’s use of offshore funds to invest in its own stocks. Between 2013 and 2018, millions were invested in Adani Group through these opaque funds by promoter family’s acquaintances.

Two men specifically have been given “honourable” mention for spending years doing the deed. Their names are Nasser Ali Shaban Ahli and Chang Chung-Ling. Nasser Ali is a director of the United Arab Emirates (UAE)-based consultancy company Al Jawda Trade & Services. As for Chang, he has been reported to hold directorships in Adani Global. Around $430 million (₹2,795 crores) in March 2017 was syphoned through the Global Opportunities Fund (GOF), a Bermuda-based investment fund.

Strikes on Adani Group Due to “The Report”

Now that you have been introduced to what OCCRP claims, let’s take a look at the hits Adani group have taken:

The Great Sink (Worth ₹35,000 Crore)

As retail investors, we are well aware of how a small news breaking can lead to a stock portraying either bullish or bearish behaviour. Thus, the fall of Adani Group's market cap with the release of the report is not exactly surprising. What's a mouth opener in this scenario is how all 10 stocks of the Adani Group, including Adani Enterprises Ltd. and Adani Green Energy Ltd., fall at once.

So, before the OCCRP report, the overall market cap of the group was around ₹10.84 lakh crore. This sum dropped to nearly ₹10.49 lakh crore by the end of August 31, giving the group a shock of ₹35,000 crore.

Above is the price chart from Ticker of Adani Enterprises Ltd. Just like this stock, other stocks also saw a downfall of around 4%, give or take, by August 31. Red has been the colour of Adani stocks for over half of 2023.

SEBI’s Watchful Eyes

After the Hindenburg debacle, SEBI started investigations on the Adani Group. Although many allegations have been splattered over the conglomerate, including benefiting from political ties, the Hindenburg report attracted the regulator’s immediate attention. On August 25, SEBI informed the Supreme Court of India that they were pretty close to wrapping up investigations on Adani Group.

With the unravelling of the new report, India’s watchdog has additional material to look into as part of its investigation. SEBI officials commented that they would consider “any new facts” that would help them make the right decision.

But one thing worth pointing out here is that SEBI’s investigation began after October 2020. Are you wondering why this date is of importance here? Well, the thing is, as per the OCCRP report, there was a correspondence between the director general of the Directorate of Revenue Intelligence (DRI) and the SEBI Chief in January 2014. It was regarding “the dealings of the Adani Group of Companies in the stock market”.

As per the report, the DRI wrote to SEBI about having evidence of the Adani Group manipulating stock prices via a Mauritius-based money syphoning fund. But, SEBI rejects any claims of receiving evidence or a letter about the same.

Hindenburg Research Report= OCCRP Report?

The officials from Adani Group’s office used the term “recycled allegations” for the OCCRP report. Many allegations like stock price manipulation, family/acquaintances involvement and many others were claims from OCCRP’s side, similar to Hindenburg.

The reason for Hindenburg Research’s rise to fame, aka their infamous Adani Group misconduct report, seems to be pretty close to their hearts. Their response to OCCRP’s report via the social media platform X (formerly Twitter) says everything for itself. 👇

Both reports are so similar in terms of the allegations that one can even rename OCCRP’s report as a second version of Hindenburg’s report. That’s the reason many call this scandal the “Hindenburg 2.0”. Check out these similarities:

• In January 2017, the two investors involved in stock price manipulation and offshore fund transfers held 3.4% of total shares in Adani Enterprises, 4% in Adani Power and 3.6% in Adani Transmission. This points towards a dubious shareholding pattern by the company, which is very similar to the promoter holding disclosure Hindenburg did in its report.
• EIFF, EMRF, and GOF supposedly invested funds in the Adani Group via Vinod Adani’s company, “Excel Investment and Advisory Services Limited''. Vinod, Gautam Adani’s brother, is a promoter of the group. The report reveals invoices and transaction records of around $1.4 million as advisory management fees from the three investment funds. This allegation is quite similar to Hindenburg’s allegation of Vinod Adani controlling offshore shell companies through his acquaintances.

The Bottom Line

Adani Group’s Chairperson, Gautam Adani, rejected these allegations by stating them as baseless efforts of the foreign media to revive the scandalous Hindenburg report. On the other hand, the authorities in charge of the investigation are checking everything coming their way. Adani Group claims they are ready to provide any kind of cooperation to clear its name. But, whether this confidence comes from being innocent of the allegations or due to the rumoured support from powerful personalities is a question one must ask.