By P R Sanjai and Sidhartha Shukla
Gautam Adani published a 413-page rebuttal after allegations of fraud by short seller Hindenburg Research erased $51 billion of his flagship firm’s market value. Some 65 of the 88 questions posed by Hindenburg are based off Adani’s public disclosures and the conduct of the American short seller “is nothing short of a calculated securities fraud under applicable law,” Adani Group said in a statement Sunday. It reiterated it will “exercise our rights to pursue remedies to safeguard our stakeholders before all appropriate authorities.”
The lengthy response comes ahead of the final few days of a $2.5 billion share sale by Adani Enterprises Ltd., which received overall subscriptions of 1 per cent on Friday. While investors in Indian public offerings typically wait until the last day of the sale to place bids, there were concerns that Hindenburg’s attack on the country’s richest man would sour sentiment.
“This is not merely an unwarranted attack on any specific company but a calculated attack on India, the independence, integrity and quality of Indian institutions, and the growth story and ambition of India,” Adani said in its response.
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US-based Hindenburg had alleged that its two-year investigation found the Adani Group “engaged in a brazen stock manipulation and accounting fraud scheme over the course of decades” and called out the conglomerate’s “substantial debt.” The firm, which said it has taken a short position in Adani’s companies through US-traded bonds and non-Indian-traded derivatives, declined to share details of the trade when reached by Bloomberg News.
1 Gautam Adani’s younger brother, Rajesh Adani, was accused by the Directorate of Revenue Intelligence (DRI) of playing a central role in a diamond trading import/export scheme around 2004-2005. He was subsequently arrested twice over allegations of customs tax evasion, forging import documentation and illegal coal imports. Given his history, why was he subsequently promoted to serve as Managing Director at the Adani Group?
Each of the above matters are closed and dismissed in our favour. Further, these have been disclosed by us in the public domain and all our stakeholders are aware of the same. These have been cited solely in an attempt to further the narrative of lies.
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2 Gautam Adani’s brother-in-law, Samir Vora, was accused by the DRI of being a ringleader of a diamond trading scam and of repeatedly making false statements to regulators. Given his history, why was he subsequently promoted to Executive Director of the critical Adani Australia division?
Same as above
3 As part of the DRI investigation into over-invoicing of power imports, Adani claimed that Vinod Adani was “not at all having any involvement in any Adani Group of companies”, except as shareholder. Despite this claim, a pre-IPO prospectus for Adani Power from 2009 detailed that Vinod was director of at least 6 Adani Group companies. Were Adani’s original statements about Vinod, made to regulators, false?
There were two DRI investigations initiated against us in respect of over-invoicing of power imports. The first DRI investigation (initiated pursuant to show cause notice issued to Maharashtra Eastern Grid Power Transmission Company Limited & others) has been adjudicated before the courts and has been closed and dismissed in our favour and consequently it has been determined that there was no over-invoicing. The second DRI investigation (initiated pursuant to show cause notice issued to Adani Power Maharashtra Limited, Adani Power Rajasthan Ltd. & others) has been decided in our favour both in the lower court as well as in appeal before the CESTAT and consequently it has been determined that there was no over-invoicing. Whilst an appeal in this respect has been preferred and is pending, we strongly believe this will be decided in our favour in line with the decision of the lower court and CESTAT. Each of these investigations are part of disclosures already made by us in the public domain
4 What has been the full extent of Vinod Adani’s role in the Adani Group to date, including all roles on deals and entities that have transacted with the Adani Group?
Vinod Adani does not hold any managerial position in any Adani listed entities or their subsidiaries and has no role in their day to day affairs. As such, these questions have no relevance to the entities in the Adani portfolio and we are not in a position to comment on your allegations on the business dealings and transactions of Mr. Vinod Adani. We reiterate that any transactions by the Adani portfolio companies with any related party have been duly identified and disclosed as related party transactions in compliance with Indian laws and standard and have been carried out on arm’s length terms.
5 Mauritius-based entities like APMS Investment Fund, Cresta Fund, LTS Investment Fund, Elara India Opportunities Fund, and Opal Investments collectively and almost exclusively hold shares in Adani-listed companies, totaling almost U.S. $8 billion. Given that these entities are key public shareholders in Adani, what is the original source of funds for their investments in Adani companies?
Each of the entities referenced in queries above are public shareholders in the listed companies in the Adani Portfolio. Innuendoes that they are in any manner related parties of the promoters are incorrect. A listed entity does not have control over who buys / sells / owns the publicly traded shares or how much volume is traded, or the source of funds for such public shareholders nor is it required to 48 have such information for its public shareholders under laws of India. Hence we cannot comment on trading pattern or behavior of public shareholders.
6 Recent right-to-information requests confirm that SEBI is investigating Adani’s foreign fund stock ownership. Can Adani confirm that this investigation is ongoing and provide details on the status of that investigation?
The relevant entities have already responded to the stock exchanges
7 What information has been provided thus far as part of any investigations, and to which regulators?
The relevant entities have already responded to the stock exchanges
8 Entities associated with Monterosa Investment Holdings collectively own at least US $4.5 billion in concentrated holdings of Adani Stock. Monterosa’s CEO served as director in 3 companies alongside fugitive diamond merchant Jatin Mehta, whose son is married to Vinod Adani’s daughter. What is the full extent of the relationship between Monterosa, its funds, and the Adani family?
Each of the entities referenced in queries above are public shareholders in the listed companies in the Adani Portfolio. Innuendoes that they are in any manner related parties of the promoters are incorrect. A listed entity does not have control over who buys / sells / owns the publicly traded shares or how much volume is traded, or the source of funds for such public shareholders nor is it required to 48 have such information for its public shareholders under laws of India. Hence we cannot comment on trading pattern or behavior of public shareholders.
9 What is the extent of the Adani Group Companies, and any Vinod Adani related entities’ dealings with Jatin Mehta?
There are no business relationships or business dealings with Mr. Jatin Mehta.
10 A once-related party entity of Adani called Gudami International, headed by close Adani associate Chang Chung-Ling, invested heavily in one of the Monterosa funds that allocated to Adani Enterprises and Adani Power. Monterosa entities continue as key Mauritius shareholders in Adani companies. What is Adani’s explanation for this large, concentrated investment into Adani listed companies by a related-party entity?
Each of the entities referenced in queries above are public shareholders in the listed companies in the Adani Portfolio. Innuendoes that they are in any manner related parties of the promoters are incorrect. A listed entity does not have control over who buys / sells / owns the publicly traded shares or how much volume is traded, or the source of funds for such public shareholders nor is it required to 48 have such information for its public shareholders under laws of India. Hence we cannot comment on trading pattern or behavior of public shareholders.
11 What was the original source of funds for each of the Monterosa funds and their investments in Adani?
Same as above
12 A former trader for Elara, a firm with almost $3 billion in concentrated holdings of Adani shares, including a fund that is 99 per cent concentrated in shares of Adani, told us that it is obvious that Adani controls the shares. He added that the structure of the funds is intentionally designed to conceal their beneficial ownership. How does Adani respond?
Same as above
13 Leaked emails show that the CEO of Elara had dealings with notorious stock manipulator Dharmesh Doshi, partner of Ketan Parekh, even after Doshi became a fugitive for his alleged manipulation activity. How does Adani respond to this relationship, given that Elara is one of the largest “public” holders of shares of Adani?
Same as above
14 What was the original source of funds for the Elara funds and their investments in Adani?
Same as above
15 Adani has worked extensively with international incorporation firm Amicorp, which has established at least 7 of its promoter entities, at least 17 offshore shells and entities associated with Vinod Adani, and at least 3 Mauritius-based offshore shareholders of Adani stock. Amicorp played a key role in the 1MDB international fraud scandal, according to the book Billion Dollar Whale and US legal case files, along with files from the Malaysian anti-corruption commission. Why has Adani continued to work closely with Amicorp despite its proximity to a major international fraud and money laundering scandal?
Amicorp is a recognized firm that provides secretarial services to various entities and corporate groups from across the globe and not just the Adani portfolio entities. More details for Amicorp and its portfolio are available at: https://www.amicorp.com/. We are not concerned with these completely unrelated “scandals” that you refer to in a blatant attempt to build a false narrative around our group. Hindenburg can write to Amicorp to seek their response if it so wishes about any scandal they believe Amicorp is involved in.
16 New Leaina is a Cyprus-based investment firm, which held ~95 per cent of its holdings in shares of Adani listed companies, consisting of over US $420 million. The entity is operated by Amicorp. What was the original source of funds for New Leaina and its investments in Adani?
Each of the entities referenced in queries above are public shareholders in the listed companies in the Adani Portfolio. Innuendoes that they are in any manner related parties of the promoters are incorrect. A listed entity does not have control over who buys / sells / owns the publicly traded shares or how much volume is traded, or the source of funds for such public shareholders nor is it required to 48 have such information for its public shareholders under laws of India. Hence we cannot comment on trading pattern or behavior of public shareholders.
17 Opal Investment Private Ltd. is the largest claimed independent holder of shares of Adani Power, with 4.69 per cent of the company (representing ~19 per cent of the float). It was formed on the same day, in the same jurisdiction (Mauritius) by the same small incorporation firm (Trustlink) as an entity associated with Vinod Adani. How does Adani explain this?
Same as above
18 What was the original source of funds for Opal and its investments in Adani?
Same as above
19 Trustlink’s CEO touts its close relationship with Adani. The same Trustlink CEO was previously alleged by the DRI to have been involved in a fraud using shell companies with Adani. What are the full details of Trustlink’s CEO’s dealings with the Adani Group, including those detailed in the DRI investigative records?
Trustlink is also a firm providing secretarial services to various entities and not just the Adani portfolio, including for incorporating companies in Mauritius and in the course of such services also acts as director in the Mauritius entities. The Trustlink CEO is not a director in any of the entities in the Adani Portfolio. We have already responded on the DRI investigations in detail above. Unfortunately Hindenburg’s report seems to include characteri ation of what is a history of individual’s job listings on LinkedIn as “touts” of a “close relationship”, which stems from a lack of understanding of laws in relevant jurisdictions and of the existence and work done by independent firms providing secretarial services in these jurisdictions.
20 The above-named offshore entities holding concentrated positions in Adani stock accounted for up to 30 per cent-47 per cent of the yearly delivery volume in Adani stocks, a massive irregularity, according to our analysis of data from Indian exchanges and disclosed trading volume per Adani filings. How does Adani explain the extreme trading volume from this concentrated group of opaque offshore funds?
Each of the entities referenced in queries above are public shareholders in the listed companies in the Adani Portfolio. Innuendoes that they are in any manner related parties of the promoters are incorrect. A listed entity does not have control over who buys / sells / owns the publicly traded shares or how much volume is traded, or the source of funds for such public shareholders nor is it required to 48 have such information for its public shareholders under laws of India. Hence we cannot comment on trading pattern or behavior of public shareholders.
21 The nature of this trading suggests that these entities are involved in manipulative wash trading or other forms of manipulative trading. How does Adani respond?
Same as above
22 In 2019, Adani Green Energy completed two offerings for sale (OFS) that were critical for ensuring that its public shareholders were above the 25 per cent listing threshold requirement. What portion of these OFS deals were sold to offshore entities, including Mauritius and Cypriot entities named in our report? These allegations again emanate from a lack of understanding by Hindenburg of Indian laws. Under Indian laws, all listed entities are required to have a public shareholding of a minimum of 25 per cent. Since the shares of AGEL got listed after the demerger from AEL in June 2018, AGEL was required to comply with the requirements of regulation 38 within 12 months from the date of listing thereof. 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. This process is not controlled by the seller or the buyer and are implemented through an automated order book matching process on the platform of the stock exchange. Even the purchaser of securities is not visible to the seller on the stock exchange platform. The shareholding pattern of AGEL, both pre and post completion of offerings for sale are already disclosed on the website of Stock Exchanges with total holdings amongst the different Foreign Portfolio Investors
23 Indian listed corporates receive a weekly shareholding update, not disclosed to the public, which would detail the shareholding changes around the deals. Will Adani detail the full list of offshore entities that participated in the OFS deals?
Same as above
24 Adani chose Monarch Networth Capital to run the OFS offerings. An Adani private company has a small ownership stake in Monarch, and Gautam Adani’s brother-in-law had previously purchased an airline together with the firm. This close relationship seems to pose an obvious conflict of interest. How does Adani respond?
Monarch Networth Capital Limited (MNCL) was selected (as fully disclosed in the public domain) for their credentials and ability to tap into the retail market. More details around Monarch are available at https://www.mnclgroup.com/ Monarch’s “suspension” that has been alluded to, was a 1 month suspension more than a decade ago in 2011 and has no further relevance to their appointment for the OFS. It may be noted that several other banks (including international banks) have been subjected to similar or lengthier suspensions in the Indian market. This fact has been deliberately omitted by Hindenburg. With nearly 3 decades of experience in retail broking, Institutional Equities, Investment Banking, fund management, global access and wealth and third-party product distribution, they are an award wining brokerage house with accreditations as the “Best regional retail broker by NSE in 2018”. The company was also awarded as the “Top performing member in the cash market for 2015-16” by NSE (National Stock Exchange).
25 Why did Adani choose Monarch Networth Capital, a small firm previously suspended and sanctioned by SEBI over allegations of market manipulation, to run the offerings, rather than a large, well-respected broker?
Same as above
26 Mr. Robbie Singh, Group CFO at the time the shareholding issue erupted in public forums in 2021, claimed in an NDTV interview on June 16 2021 that funds like the Mauritius shareholders had not made fresh investments and had come to own shares of other Adani stocks through vertical demergers. Our analysis shows that it was almost certain that the Mauritius shareholders made further investments in Adani Green. This coincides with the time when the promoters were required to bring their shareholding down to meet public shareholding norms. How does Adani Group respond to this new evidence?
These allegations again emanate from a lack of understanding by Hindenburg of Indian laws. Under Indian laws, all listed entities are required to have a public shareholding of a minimum of 25 per cent. Since the shares of AGEL got listed after the demerger from AEL in June 2018, AGEL was required to comply with the requirements of regulation 38 within 12 months from the date of listing thereof. 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. This process is not controlled by the seller or the buyer and are implemented through an automated order book matching process on the platform of the stock exchange. Even the purchaser of securities is not visible to the seller on the stock exchange platform. The shareholding pattern of AGEL, both pre and post completion of offerings for sale are already disclosed on the website of Stock Exchanges with total holdings amongst the different Foreign Portfolio Investors
27 Our findings indicate that SEBI has investigated and prosecuted more than 70 entities and individuals, including Adani promoters, for manipulating Adani stock between 1999 to 2005. How does Adani respond?
There are no ongoing proceedings against the Adani promoters before SEBI in relation to this issue and all past cases before SEBI have been closed. These have also been duly disclosed by us and our stakeholders are already aware of the same. We are neither aware of, nor are we required to be, aware of any proceedings against these other “entities and individuals”, who are not Adani promoters.
28 A SEBI ruling determined that Adani promoters aided and abetted Ketan Parekh in the manipulation of shares of Adani Exports (now Adani Enterprises), showing that 14 Adani private companies transferred shares to entities controlled by Parekh. How does Adani explain this coordinated, systematic stock manipulation in its shares, together with one of India’s most notorious convicted stock fraudsters?
The allegation in relation to Ketan Parekh working with Adani companies are incorrect. This matter has been disposed of by SEBI on 17th April 2008 and has also been duly disclosed by us in the public domain
29 In its defense, Adani Group claimed it had dealt with Parekh and his stock manipulation efforts to finance operations at the Mundra port. Does Adani view extraction of capital through stock manipulation as a legitimate method of financing?
The allegation in relation to Ketan Parekh working with Adani companies are incorrect. This matter has been disposed of by SEBI on 17th April 2008 and has also been duly disclosed by us in the public domain
30 Individuals close to Ketan Parekh have told us that he continues to work on transactions with his old clients, including Adani. What was and is the full extent of the relationship between Parekh and the Adani Group, including either entity’s relationship with Vinod Adani?
The allegation in relation to Ketan Parekh working with Adani companies are incorrect. This matter has been disposed of by SEBI on 17th April 2008 and has also been duly disclosed by us in the public domain
31 Given that Adani Group promoters pledge shares as collateral for loans, wouldn’t stock manipulation artificially inflate the collateral and borrowing base for such loans, posing a significant risk for the promoters’ counterparties and, by proxy, Adani shareholders who would suffer at the hands of a collateral call or deleveraging via equity sale?
Raising financing against shares as collateral is a common practice globally. These loans are given by large reputed financial institutions and banks on the back of thorough credit analysis of the underlying assets in the listed company as well as detailed assessment of liquidity of the company stock pledged as collateral. Further, there is a robust disclosure system in place in India wherein listed companies need to disclose their overall pledge position of shares to stock exchanges from time to time. Consequently, Hindenburg’s narrative of alleged stock manipulation on account of pledge of shares has no basis and stems from ignorance of the securities laws in India.
32 In 2007, an Economic Times article described a deal whereby a brokerage controlled by Dharmesh Doshi, a fugitive associated with Ketan Parekh, bought shares in a pharmaceutical company for a BVI entity where Vinod Adani served as shareholder and director. What was and is the full extent of the relationship between Dharmesh Doshi and the Adani Group, including with Vinod Adani?
As already stated, all business transactions by the entities in the Adani portfolio are in ordinary course of our business, in compliance with all applicable laws and have been fully disclosed as required.
33 What is the explanation for a Vinod Adani entity receiving an alleged US $1 million as part of a transaction with Jermyn Capital, the brokerage entity previously run by Dharmesh Doshi, at the time a fugitive and wanted market manipulator?
Same as above
34 Investors generally prefer clean and simple corporate structures to avoid the conflicts of interest and accounting discrepancies that can lurk in sprawling, convoluted structures. Adani’s 7 key listed entities collectively have 578 subsidiaries and have engaged in a total of 6,025 separate related-party transactions in fiscal year 2022 alone, per BSE disclosures. Why has Adani chosen such a convoluted, interlinked corporate structure?
This allegation again emanates from a complete lack of understanding by Hindenburg of the business structures and requirements of infrastructure companies. For infrastructure business in India and many other jurisdictions, companies typically have to operate with a ring fenced project finance structure wherein each project is housed in a separate company and financing is raised against the specific project assets. This structure is also preferred by banks and financial institutions as it provides bankruptcy remoteness. In some cases, regulatory considerations also require projects to be set up in separate companies. For example – Transmission projects in India are awarded under tariff based competitive bidding, in such bidding the successful bidder has to acquire the SPV which is undertaking the project. Hence, it is a regulatory requirement as part of the Electricity Act, 2003 and the regulations and bid documents approved by the Central Electricity Regulatory Commission to execute projects in different special purpose companies.
35 We found at least 38 Mauritius-based entities associated with Vinod Adani and Subir Mittra (the head of the Adani private family office). We also found Vinod Adani associated entities in other tax haven jurisdictions like Cyprus, the UAE, Singapore, and various Caribbean islands. Several of these entities have transacted with Adani entities without disclosing the related party nature of the dealings, seemingly in violation of the law, as evidenced throughout our report. What is the explanation for this?
All transactions entered into by us with entities who qualify as ‘related parties’ under Indian laws and accounting standards have been duly disclosed by us. Further these have been carried out on arm’s length terms in accordance with applicable laws. Further, these are also disclosed by us, are publicly available to all regulators and our stakeholders, and have been duly verified and audited by independent third parties who are competent and have the required expertise in this respect. As stated above, Adani Portfolio companies follow a stated policy of having global big 6 or regional leaders as Statutory Auditors.
36 How many entities is Vinod Adani associated with as either director, shareholder, or beneficial owner? What are the names and jurisdictions of these entities? Vinod Adani does not hold any managerial position in any Adani listed entities or their subsidiaries and has no role in their day to day affairs. As such, these questions have no relevance to the entities in the Adani portfolio and we are not in a position to comment on your allegations on the business dealings and transactions of Mr. Vinod Adani. We reiterate that any transactions by the Adani portfolio companies with any related party have been duly identified and disclosed as related party transactions in compliance with Indian laws and standard and have been carried out on arm’s length terms.
37 What are the full details of the Vinod Adani-associated entities’ dealings with private and listed entities in the Adani empire?
Same as above
38 We found websites for 13 Vinod Adani entities that seem like rudimentary efforts to demonstrate that the entities have operations. Many websites were formed on the exact same day and listed the same set of nonsensical services such as “consumption abroad” and “commercial presence”. What business or operations do each of these entities actually engage in?
Same as above
39 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?
Same as above
40 A Vinod Adani-controlled Mauritius entity now called Krunal Trade & Investment lent INR 11.71 billion (U.S. ~$253 million) to a private Adani entity without disclosure of it being a related party loan. How does Adani explain this?
The above cited transactions with Krunal Trade & Investment, Vakoder, Rehvar Infrastructure, Milestone Tradelink, ardenia Trade and Investment and the ‘private Adani entities’ are not ‘related party transactions’ under laws of Indian or accounting standards. Consequently, we are neither aware nor required to be aware of their ‘source of funds’. All transactions cited above between the Adani listed entities and the “private Adani entities”, i.e., Adani Estates Private Limited, Sunbourne Developers Private Limited are related party transactions, which have been undertaken on arm’s length terms and in compliance with applicable Indian laws and standard, and have also been fully disclosed as related party transactions.
41 A Vinod Adani-controlled UAE entity called Emerging Market Investment DMCC lists no employees on LinkedIn, has no substantive online presence, has announced no clients or deals, and is based out of an apartment in the UAE. It lent $1 billion to an Adani Power subsidiary. What was the source of the Emerging Market Investment DMCC funds?
This allegation is clearly incorrect and is due to a lack of understanding of the Indian debt restructuring regulations. As part of the debt resolution plan of Mahan Energen Limited (earlier named as Essar Mahan Limited), duly approved by the NCLT under the Indian Bankruptcy Code, Emerging Market Investment DMCC (an affiliate of Adani Power Limited, the successful bidder for this asset) acquired the unsustainable debt from the erstwhile lenders of Mahan Energen Limited for a consideration of USD 100. Emerging Market Investment DMCC has not ‘lent’ U.S. $1 billion to Mahan Energen, but has acquired this debt by paying USD 100 as part of the NCLT approved resolution plan. The order of the National Company Law Tribunal is annexed as Annexure 7. In any event, there is no restriction on Adani listed entities/ their subsidiaries to avail loans from promoter entities from time to time for their business purposes. All such loans are availed in compliance with relevant laws and are suitably disclosed as required under the laws and accounting standard
42 A Vinod Adani-controlled Cyprus entity called Vakoder Investments has no signs of employees, no substantive online presence, and no clear operations. It had an investment of ~$85 million in an Adani private entity without disclosure that it was a related party. How does Adani explain this? The above cited transactions with Krunal Trade & Investment, Vakoder, Rehvar Infrastructure, Milestone Tradelink, ardenia Trade and Investment and the ‘private Adani entities’ are not ‘related party transactions’ under laws of Indian or accounting standards. Consequently, we are neither aware nor required to be aware of their ‘source of funds’. All transactions cited above between the Adani listed entities and the “private Adani entities”, i.e., Adani Estates Private Limited, Sunbourne Developers Private Limited are related party transactions, which have been undertaken on arm’s length terms and in compliance with applicable Indian laws and standard, and have also been fully disclosed as related party transactions.
43 What was the source of the Vakoder funds?
Same as above
44 We have identified a series of transactions from 2013-2015 whereby assets were transferred from a subsidiary of listed Adani Enterprises to a private Singaporean entity controlled by Vinod Adani, without disclosure of the related party nature of these deals. What is the explanation for these transactions and the lack of disclosure?
The transactions relate to transfer of the cost to the specific project entity which was incorporated for rail businesses (Carmichael Rail Network Trust incorporated on 17th September 2014). These transactions have been carried out in compliance with applicable law and on arm’s length terms. The amounts transferred included: (i) Exploration and Evaluation Assets (i.e. Capital works in progress (‘C I ’)); and (ii) Amounts already expensed to profit and loss account and an arms length management fee charged by Adani Mining Pty Ltd (a step-down subsidiary of Adani Enterprises) These transactions were fully disclosed in the financial statements Adani Mining Pty Ltd
45 The private Singaporean entity controlled by Vinod Adani almost immediately wrote down the value of the transferred assets. Were those still held on the books of Adani Enterprises, it likely would have resulted in an impairment and significant decline in reported net income. What is the explanation for why these assets were transferred to a private undisclosed related party before being written down?
Same as above
46 We found that a “silver bar” merchant based at a residence with no website and no obvious signs of operations, run by a current and former Adani director, lent INR 15 billion ($202 million) to private Adani Infra with no disclosure of it being a related party transaction. What is the explanation for the lack of required disclosure?
The above cited transactions with Krunal Trade & Investment, Vakoder, Rehvar Infrastructure, Milestone Tradelink, ardenia Trade and Investment and the ‘private Adani entities’ are not ‘related party transactions’ under laws of Indian or accounting standards. Consequently, we are neither aware nor required to be aware of their ‘source of funds’. All transactions cited above between the Adani listed entities and the “private Adani entities”, i.e., Adani Estates Private Limited, Sunbourne Developers Private Limited are related party transactions, which have been undertaken on arm’s length terms and in compliance with applicable Indian laws and standard, and have also been fully disclosed as related party transactions.
47 What was the purpose of the loan, and what was the original source of the “silver bar” merchant’s funds?
Same as above
48 Gardenia Trade and Investments is a Mauritius-based entity with no website, no employees on LinkedIn, no social media presence, and no apparent web presence. One of its directors is Subir Mittra, the head of the Adani private family office. The entity lent INR 51.4 billion ($692.5 million) to private Adani Infra with no disclosure of it being a related party loan. What is the explanation for the lack of required disclosure?
Same as above
49 What was the purpose of the loan, and what was the original source of the Gardenia Trade and Investments funds?
Same as above
50 Milestone Tradelinks, another claimed silver and gold merchant also run by a longstanding employee of the Adani Group and a former director of Adani companies, invested INR 7.5 billion (U.S. $101 million) into Adani Infra. Once again there was no disclosure of it being a related party loan. What is the explanation for the lack of required disclosure?
Same as above
51 What was the purpose of the loan, and what was the original source of the Milestone Tradelinks funds?
Same as above
52 Another secretive Mauritius entity called Growmore Trade and Investment netted an overnight ~$423 million gain through a stock merger with Adani Power. According to court records, Growmore is controlled by Chang Chung-Ling, an individual who shared a residential address with Vinod Adani and had been named in DRI fraud allegations as director of a key intermediary entity used to siphon funds out of Adani Enterprises. What is the explanation for this windfall gain to an opaque private entity controlled by a close associate of the Adani family?
The stock merger referred to in the allegation was undertaken after following due process as per Companies Act and all applicable regulations including SEBI regulations. The valuation for the stock merger was supported by an independent third party reputed valuers. Ernst & Young provided the valuation report supported by a fairness opinion from ICICI Securities. The scheme of amalgamation including exchange ratio and the allotment of shares were considered and approved by majority shareholders of both companies, various regulatory authorities including stock exchanges, Regional director of Central Government and the High court of Gujarat. The order of the High Court in annexed in Annexure 9. Hence innuendoes of overnight gain are incorrect and baseless. 51 We have already addressed above all allegations in respect of DRI investigations, which as detailed above have been closed and dismissed in our favour
53 What is the nature of Chang Chung-Ling’s relationship with the Adani Group, including his relationship with Vinod Adani?
In August 2017, the Adjudicating authority of DRI i.e. which was the same authority who issued the show cause notice to Maharashtra Eastern Grid Power Transmission Limited (MEGPTCL) and PMC Projects, dealt with this issue in detail and concluded that the allegations were false, holding that all the imports were genuine and being undertaken at arm’s length. The Authority further concluded that the value declared is correct and is not required to be re-determined. Even the Appellate Tribunal (CESTAT) in appeal has upheld the order of the adjudicating authority and rejected the challenge from the Customs Department. These findings are also concurred by Indian Income Tax authorities. It can be clearly concluded that the allegation that PMC was managed and controlled by Adani portfolio through its entity MEGPTCL is unsustainable for the reason that the price was arrived at arm’s length. The question of MEGPTCL influencing or controlling PMC is far-fetched as both MEGPTCL and PMC are not related. This can be referenced in sub para (ii) of Para 26 at page 22 of the order of the Appellate Tribunal appended in Annexure 8. This is an independent judicial process and has withstood scrutiny of challenge and any allegations to the contrary are baseless. We have already responded above in details on the DRI investigations.
54 Listed Adani companies have paid INR 63 billion to private contractor PMC Projects over the past 12 years to help construct major projects. A 2014 DRI investigation called PMC Projects a “dummy firm” for Adani Group. Given that constructing major projects is Adani’s business, is PMC Projects in fact just a “dummy firm”?
Same as above
55 PMC Projects has no current website. Historical captures for its website show that it shared an address and phone number with an Adani company. Numerous employee LinkedIn profiles show that they work concurrently at both. Several expressed confusion at whether there was any difference. Is PMC Projects a mere “dummy firm” for Adani?
Same as above
56 Newly revealed ownership records show that PMC Projects is owned by the son of Chang Chung-Ling, the close associate of Vinod Adani mentioned above. Taiwanese media reports that the son is “Adani Group’s Taiwan representative”. We found pictures of him literally holding an Adani sign at an official government event, where he represented Adani. Once again, is PMC projects a mere “dummy firm” for Adani, as earlier alleged by the government?
Same as above
57 If so, why hasn’t either company reported its extensive dealings as being related party transactions, as required?
58 In FY20, AdiCorp Enterprises only generated INR 6.9 million ($97,000) in net profit. That same year, 4 Adani Group companies entities lent it ~$87.4 million, or more than 900 years of AdiCorp net income. These loans seemed to make little financial sense. What was the underwriting process and business rationale that went into making these loans?
AdiCorp is not a related party, and transactions with AdiCorp are not ‘related party transactions’ under laws of Indian or accounting standards and these have been undertaken in compliance with applicable law.
59 AdiCorp almost immediately re-lent 98 per cent of those loans to listed Adani Power. Was AdiCorp simply used as a conduit to surreptitiously move funds into Adani Power from other Adani Group entities and side-step related party norms?
Same as above
60 Why have listed Adani companies paid private Adani entity “Adani Infrastructure Management Services” INR 21.1 billion ($260 million) over the past 5 years, given that the listed companies’ business is also managing infrastructure?
This allegation stems from a complete lack of understanding the manner in which businesses are carried out by large companies in these sectors, with suggestions that merely because they manage infrastructure business, they cannot outsource parts work or enter into contracts for obtaining these services from other related parties who specialize in providing such services. It further flows from a complete lack of understanding of these complex businesses which require specialized services and management which cannot at all times be housed in the same corporate entity. Adani Infrastructure Management Services Limited (AIMSL) is such a specialized service provider for the Adani companies. AIMSL is a pioneer in operation and maintenance of key assets in India’s power sector with all required manpower and qualifications to be able to provide such services to the Adani companies on arms’ length terms. Currently, AIMSL is operating AGEL, ATL & APL assets spread across multiple states such as Rajasthan, Karnataka, Maharashtra, Gujarat, M.P, Haryana etc. and is being managed by experienced resources.
61 Listed company Adani Enterprises paid $100 million to a company, ultimately held by private trust of the Adani family in the British Virgin Islands (BVI), a notorious Caribbean tax haven, with the claimed rationale being to pay a security deposit to use an Australian coal terminal. Why did the listed company need to pay such lucrative fees to Adani’s private interests?
Hindenburg seems to suggest, that simply because two parties are related, transactions between them cannot be for arm’s length consideration. It has clearly been disclosed by us that North Queensland Export Terminal Pty Ltd (formerly known as Adani Abbot Point Terminal Pty Ltd) (“N XT”) is a related party of Adani Mining Pty Ltd (a stepdown subsidiary of Adani Enterprises Limited), and transactions between them are related party transactions. Hindenburg has also conveniently failed to mention that NQXT is a multi-user terminal and Adani Mining Pty Ltd is one of more than nine major long-term customers of NQXT. As part of any long term take or pay contract for accessing the port infrastructure such as NQXT, users typically provide credit support in order to secure their obligations. In this case, as fully disclosed, Adani Mining Pty Ltd paid N XT a ‘security deposit’ to secure its obligations under the long term take or pay contract. The amount was neither ‘charged’ nor was a ‘fee’ as incorrectly alleged in the report. Instead, Hindenburg seems to suggest, in flagrant violation of standard governance requirements for related party transactions, that simply because two parties are related, NQXT (which is a separate corporate entity and subject to the regulations of Australian Securities & Investment Commission) should have provided long term access to the terminal for no security deposit or charges at all rather than a contract on arm’s length basis.
62 Adani Enterprises has had 5 chief financial officers over the course of 8 years, a key red flag suggesting potential accounting irregularities. Why has Adani Enterprises had such a difficult time retaining someone for its top financial position?
Here again Hindenburg has tried to color the facts to suit their narrative and have completely misrepresented the truth in respect of our CFOs. The truth is that several of the CFOs that Hindenburg claims have left, are in fact still part of the organization in various other capacities, including taking on larger or key roles as part of our growth stories. Mr. Devang Desai (the CFO of Adani Enterprises Limited who resigned in May-2014), Mr. Ashok Jagetiya, Mr. Kaushal Shah (the CFOs of Adani Green Energy Limited who resigned in Aug-2017, Nov-2022), Mr. Suresh Chandra Jain (the CFO of Adani Power Limited who resigned in July-2020), and Mr. Rajiv Rustagi, Mr. Kaushal Shah (the CFOs of Adani Transmission Limited, who resigned in Oct-2015, Feb-2021), still continue to be part of the organization and play vital roles in the organization. The organisation allows and encourages development of individuals, including them taking on significantly larger roles from time to time. For example, Mr. Jugeshinder Singh, the current CFO of Adani Enterprises Limited, was appointed as CFO in May 2019, but has been with the organization since May-2012, where he played the role as advisor in Strategic Finance. The other CFOs mentioned in the report have left to pursue individual ambitions including their journey as entrepreneur, which we as an organization are happy to support. For example, Mr. Ameet Desai resigned as CFO of Adani Enterprises Limited to begin his journey as an entrepreneur; Mr. B. Ravi resigned as CFO of Adani Ports & SEZ Ltd for similar entrepreneurial journey. The Hindenburg report conveniently fails to mention that none of the resignation have ever been made pursuant to any alleged concerns against any of the underlying companies. Further, each of the cited resignations and changes in CFOs have been duly disclosed from time to time as per regulatory requirements and this information is already available in the public domain.
63 What were the reasons for the resignations or terminations each of these prior CFOs?
Same as above
64 Adani Green Energy, Adani Ports and Adani Power have each had 3 CFOs over 5 years, while Adani Gas and Adani Transmission have both had CFO turnover within the past 4 years. Why have Adani entities struggled to retain individuals at its top financial positions?
Same as above
65 What were the reasons for the resignations or terminations each of these prior CFOs?
Same as above
66 The independent auditor for Adani Enterprises and Adani Gas is a tiny firm called Shah Dhandharia. Historical archives of its website show that it had only 4 partners and 11 employees. It seems to have no current website. Records show it pays INR 32,000 ($435 in 2021) in monthly office rent. The only other listed entity we found that it audits has a market capitalization of about INR 640 million ($7.8 million). Given the complexity of Adani’s listed companies, with hundreds of subsidiaries and thousands of interrelated dealings, why did Adani choose this tiny and virtually unknown firm instead of larger, more credible auditors?
All these auditors who have been engaged by us have been duly certified and qualified by the relevant statutory bodies who are responsible to determine these benchmarks. All our auditors have been appointed in compliance with applicable laws. The financials and public documents of the Adani portfolio entities clearly disclose Shah Dhandharia & Co as our auditor to all regulators and stakeholders and hence, it is unclear what new findings are being brought to light by Hindenburg. In fact, and rather disturbingly, Hindenburg in furthering their agenda and profit have displayed a brazen disregard of personal privacy and safety in publishing private and personal information including pictures of government IDs without any consent or attempt to safeguard the identities of the people in question and making personal allegations and attacks around competence. The claims of seeking “transparency” and fairness ring hollow when taken in this context. In any case, all companies of Adani Portfolio have a robust governance framework. The Audit Committee of each of the listed companies is composed of 100 per cent of Independent Directors and chaired by Independent Director. The Statutory Auditors are appointed only upon recommendation by the Audit Committee to the Board of Directors. Adani Portfolio company’s follow a stated policy of having global big 6 or regional leaders as Statutory Auditors and this can be seen from the table below. Adani Enterprises Limited: AEL acts as an incubator and has businesses in various sectors and subsidiaries and associates spread over eight jurisdictions. There are more than 35 Statutory Audit firms which audit the various entities within Adani Enterprises which include a mix of Big 6 Statutory Auditors as well as statutory auditors who are highly reputed in their respective jurisdictions. Shah Dhandharia & Co. does the statutory audit of AEL entity. Shah Dhandharia & Co is also a peer reviewed Chartered Accountancy firm registered with the Institute of Chartered Accountants of India since year 1999 with experience of more than 20 years
67 The audit partner at Shah Dhandharia who signed off on Adani Gas’ annual audits was 23 years old when he began approving the audits. He had just finished university. Is that individual really in a position to scrutinize and hold to account the financials of a firm controlled by one of the world’s most powerful individuals?
Same as above
68 The audit partner at Shah Dhandharia who signed off on Adani Enterprises annual audits was as young as 24 years old when he began approving the audits. Is that individual really in a position to scrutinize and hold to account the financials of a firm controlled by one of the world’s most powerful individuals?
Same as above
69 The audit partners signing off on Adani Gas and Adani Enterprises annual audits are now both 28 years old. Again, are they in a position to credibly scrutinize and hold to account the financials of firms controlled by one of the world’s most powerful individuals?
Same as above
70 The auditor for Adani Power, an Ernst & Young affiliate, gave a “qualified” opinion in its audit, saying that it had no way to support the value of INR 56.75 billion (~700 million) in investments and loans held by Adani Power. What is Adani Power’s full explanation for the valuation of these investments and loans? The ‘qualifications’ referred to above have been done by the auditor in compliance with law and taking into account various factors which affect the business from time to time. This matter is also fully disclosed in our financial statements and all our stakeholders are clearly aware of the same.
71 Which parts of the valuation of Adani Power’s investments and loans did the auditor disagree with?
Same as above
72 Adani has been subject to numerous allegations of fraud by the DRI and other government agencies. In the 2004-2006 diamond scandal investigation, the government alleged that Adani Exports Ltd (renamed Adani Enterprises) and related entities’ exports were 3x the total exports of all the other 34 firms in the industry group put together. How does Adani explain that sudden surge in trading volume?
Each of the above matters are closed and dismissed in our favour. Further, these have been disclosed by us in the public domain and all our stakeholders are aware of the same. These have been cited solely in an attempt to further the narrative of lies.
73 The diamond export investigation also demonstrated the role played by Vinod Adani and entities in the UAE, Singapore and Hong Kong that were used to facilitate the back-and-forth movement of money and product. How does Adani explain all the trading that took place with entities associated with Vinod Adani?
Each of the above matters are closed and dismissed in our favour. Further, these have been disclosed by us in the public domain and all our stakeholders are aware of the same. These have been cited solely in an attempt to further the narrative of lies.
74 In 2011, the parliamentary Ombudsman for the Karnataka state issued a 466-page report describing Adani as the “anchor point” for a massive INR 600 billion ($12 billion) scam involving the illegal importation of iron ore, alleging that Adani had bribed all levels of the government in facilitation of the scheme. What is Adani’s response to the investigation and the extensive evidence presented as part of these findings?
The proceeding has been closed in July 2017 in our favour. The Special Investigation Team (SIT) formed by Karnataka Lokayukta had lodged an FIR against AEL and others. The same was publicly disclosed by AEL vide stock exchange disclosure dated July 30, 2011. The SIT and after a detailed investigation, determined the allegations were false and filed a closure report stating that AEL was not involved in such alleged illegal gratification. This has been accepted by the designated Lokayukta court at Bangalore.
75 In 2014, the DRI once again accused Adani of using intermediary UAE-based shell entities controlled by Vinod Adani to siphon funds, in this case through the over-invoicing of power equipment. Did Adani invoice the power equipment purchases to UAE-based entities such as Electrogen Infra FZE? If so, why?
There were two DRI investigations initiated against us in respect of over-invoicing of power equipment. The first DRI investigation (initiated pursuant to show cause notice issued to Maharashtra Eastern Grid Power Transmission Company Limited & others) has been adjudicated before the courts and has been closed and dismissed in our favour. The second DRI investigation (initiated pursuant to show cause notice issued to Adani Power Maharashtra Limited, Adani Power Rajasthan Ltd. & others) has been decided in our favour both by the DRI (the same authority who issued the show cause notice) as well as in appeal before the CESTAT. It has been held by CESTAT that all the imports were genuine and being undertaken at arm’s length and concluded that the value declared is correct and the value is not required to be redetermined. Whilst another appeal in this respect has been preferred in November 2022 and is pending, we strongly believe this will be decided in our favour in line with the decision of CESTAT. Each of these investigations are part of disclosures already made by us in the public domain
76 Was there a markup from the original purchase price for the equipment? What services did the Vinod Adani-associated entities provide that would have justified a markup? Same as above
77 The same DRI investigation found that Vinod Adani’s intermediary entity sent ~$900 million to a privately owned Adani entity in Mauritius. What is the explanation for these transactions?
Same as above
78 Where did the money from these transactions go after it was sent to a private Adani entity in Mauritius?
Same as above
79 The DRI investigation also documented many other transactions through the Vinod Adani intermediary entity, which were not probed further by investigators. What is Adani’s explanation for these other transactions?
Same as above
80 In yet another scandal, Adani was accused of over-valuing coal imports through shell entities in Dubai, the UAE, Singapore, and the BVI. Did Adani transact with entities in these jurisdictions? If so, which ones and why?
DRI, Mumbai initiated an investigation against around 40 importers (40 Companies) of coal for import made during Oct. 2010 to Mar. 2016 and sought for various documents including Invoice of 32 Supplier, Country of Origin Certificate (Form A1), Bill of Entry, Bill of Lading etc. In compliance with the DRI directions, we have already submitted the necessary documents to the regulator. No show cause notice has been issued to us till date
81 In 2019, the Singaporean entity Pan Asia Coal Trading won a coal supply tender floated by Adani Group. Pan Asia Coal Trading’s website provides no details on its coal trading experience, nor does it name a single individual associated with the company. Why did Adani Group select such a small firm for coal supply? What was the due-diligence process that went into its selection?
The transaction with Pan Asia has been clearly disclosed in the financials and hence the attempts to suggest that these transactions need to be brought to light are absurd when all relevant stakeholders have had access to this information for almost 4 years. In any event, the tenders floated by Adani portfolio entities have well laid out technical and financial qualification criteria for all prospective bidders and any prospective bidder who meets the aforementioned conditions is eligible to participate in the tenders.
82 Corporate records show that a former Adani Group company director was a director and shareholder of Pan Asia. Why didn’t Adani Group disclose the potential conflict of interest in the transaction?
This allegation stems from a complete misunderstanding by Hindenburg of the facts and what amounts to conflict of interest in bid documents. Hence to clarify, no Adani company director was a director or a shareholder in Pan Asia at the time of, or even close to the time of, when the said bidding process was carried out. Hence, there was no conflict of interest, potential or otherwise, while dealing with Pan Asia for this tender.
83 In the same year as winning the coal deal in 2019, Pan Asia Coal Trading lent $30 million to a private entity of Adani Group, per Singaporean corporate records. Why did a private company of the Adani family take money from a small single shareholder entity in Singapore at the same time its listed company was awarding a coal supply deal to it?
This loan transaction has no link to the tender. We have been informed that the loan transaction has been carried out in compliance with applicable laws by the relevant parties.
84 In interviews, Gautam Adani has said “I have a very open mind toward criticism.” Given this, why did Adani seek to have critical journalist Paranjoy Guha Thakutra jailed following his articles on allegations of Adani tax evasion?
Being open to criticism does not mean we have given up our legal right to defend ourselves against defamatory and false statements. We have exercised our rights in due compliance with law and through judicial processes in this respect.
85
In the same interview, Gautam Adani said “Every criticism gives me an opportunity to improve myself.” Given this, in 2021, why did Adani seek a court gag order on a YouTuber that made critical videos of Adani?
As above, action has been taken by us under law to defend ourselves not because these videos are “critical” but are patently false and defamatory. This was also examined by the court which after proper determination and hearing the parties, issued the order asking the YouTuber to take down the video. This YouTuber has a history of making such patently false and defamatory videos, and in a separate and unrelated incident he had an order passed against him by the Ministry of Information and Technology
86 In the same interview, Gautam Adani said “I always introspect and try to understand the others’ point of view.” Given this, why has Adani Group filed legal suits against journalists and activists, which have been condemned by media watchdogs? Why did it have an activist in Australia followed by private investigators? Being open to introspection or understanding others point of view does not mean we have given up our legal right to defend ourselves, our businesses and other employees through proper legal channels. We have exercised our rights in this matter in due compliance with law and through proper judicial processes in this respect.
87 If Adani Group has nothing to hide, why does it feel the need to pursue legal action against even the smallest of its critics?
Being open to criticism does not mean we have given up our legal right to defend ourselves against defamatory and false statements. We have exercised our rights in due compliance with law and through judicial processes in this respect.
88 Does Adani Group truly view itself as an organization with sound corporate governance that embodies its slogan, “Growth With Goodness?”
Yes. Adani companies follow high standards of corporate governance in line with global best practices. In the last 10 years, Adani portfolios of companies have emerged as epitome in terms of governance. Adani portfolio companies have instituted various corporate governance policies and committees including our Corporate Responsibility Committee (“CRC”) consisting solely of independent directors tasked with keeping the Board of Directors informed about the ESG performance of businesses. Our ESG approach is based on well-thought out goals, commitments and targets which are independently verified through an assurance process.