June 19, 2021
THE ADANI GROUP supports parts of the Indian economy. The business areas of the family-run conglomerate include airports, energy and natural resources, and other critical infrastructures. Its founder, Gautam Adani, is the 14th richest man in the world, valued at around $ 72 billion, according to Bloomberg. In terms of perceived ability to navigate India’s treacherous legal landscape and impenetrable bureaucracy, he’s in the same league as a (slightly richer) billionaire, Mukesh Ambani.
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When the share prices of the six listed companies of the Adani Group collapsed on June 14, heads turned. On that day, India’s Economic Times newspaper reported that the National Securities Depository, which conducts public exchanges, had frozen the shares of three Mauritius-based funds due to insufficient information on the underlying investors. All three funds were registered at the same address and appear to have approximately $ 6 billion in total in Adani Group assets. The news that a considerable part of the free float of the companies of the Adani Group could no longer be traded triggered wild trading in the part that was still possible. Company share prices fell between 5% and 25%.
The Adani group immediately issued a statement calling the story “blatantly wrong”. After the clearing house clarified, it was confirmed that the funds were not actually frozen. The stocks affected have largely made up for their losses. Investment firms were quick to release reports that pointed out that the strange movements in stock prices did not reflect a change in the group’s outlook, which appears good. Mr. Adani’s companies have recently received major contracts for the operation of airports and the use of energy fields. The group counts giants like Total, a French oil super major, and the Qatar sovereign wealth fund as a junior partner in various joint ventures. The combined market value of the six listed subsidiaries of the Adani Group rose to 115 billion last year.
That wasn’t the end of the confusion, however. In an official application dated June 15, the Adani Group found that part of its trading in the three Mauritian funds had actually been suspended due to an order issued a few years ago. Details of the suspension were not given. That, in turn, sparked tongues in India’s gossiping business community. Some wondered if this was a sign of regulatory crackdown on plutocrats as is currently underway in China. Others recalled a report published in April by Morning Context, a business news site, about the high exposure of the three Mauritian funds to the Adani group.
The episode also brought new attention to a quirk of Indian corporate ownership – and its uncertain future. To deal with India’s extensive, confusing and intrusive tax system, foreign investors have been investing in the country for years through Mauritius, which has a tax treaty with India. This pact has changed over time. In February 2020, a new change allowed Indian authorities, concerned about Indian citizens using the island to evade Indian taxes, to access the investor lists of funds registered in Mauritius. This time the story of a trade freeze was possibly nonsense. At other times, for one company or another, it may not be the case. ■
This article appeared in the business section of the print edition under the heading “Short Circuit”