Explained: What OCCRP says about 'manipulation' of Adani stocks

The Adani Group faces fresh allegations of stock manipulation, the charge being made this time by the Organised Crime and Corruption Reporting Project (OCCRP), a global network of investigative journalists with staff across six continents.

A report published by OCCRP on Wednesday (August 30) claimed that associates of the promoter family used Mauritius-based ‘opaque’ investment funds to secretly invest hundreds of millions of dollars to fuel the spectacular rise in group stocks between 2013 and 2018. The conglomerate has denied the charges.

Similar charges were made by a report published by short-selling firm Hindenburg Research in January this year.

What is OCCRP?

It is a group founded in 2006 by investigative journalists Sullivan and Paul Radu, who came up with the platform due to their shared interests in reporting on organised crime and systemic corruption.

OCCRP says it has directly led 398 official investigations, 621 arrests and sentences, and 131 resignations while effecting the levying of over $10 billion worth in fines and seizure of money. It publishes its stories through local media and in English and Russian through its website.

The organisation has worked on the Panama Papers project with the International Consortium of Investigative Journalists and has been a part of several high-profile investigations including that on Russian President Vladimir Putin.

The latest OCCRP report on Adani Group was published by the Financial Times and The Guardian.

What does the OCCRP report say?

OCCRP says its reporters have stumbled upon documents that reveal details of a complex offshore operation in two Mauritius-based funds, managed by the partners of the promoter family to support prices of shares of group companies from 2013 to 2018 – a period during which the ports-to-energy conglomerate saw a meteoric rise to become India's largest and most powerful business.

OCCRP said two close associates of Vinod Adani, the elder brother of group founder and chairman Gautam Adani, were found to be the sole beneficiaries of the Mauritius-based companies through which the money appeared to flow.

It said the duo – Nasser Ali Shaban Ahli from the UAE and Chang Chung-Ling from Taiwan – spent years trading hundreds of millions of dollars’ worth of Adani group stock through two Mauritius-based funds that were overseen by a Dubai-based company run by a known employee of Vinod Adani. Neither the Securities and Exchange Board of India (SEBI) nor a high-level expert committee set up following a Supreme Court ruling have been able to prove the ‘fraud’. This despite SEBI in early 2014 being handed evidence of alleged suspicious stock market activity by the Adani Group, according to OCCRP.

UK Sinha, who headed SEBI in 2014, is now a director and chairperson of Adani-owned news broadcaster NDTV.

What was the alleged modus operandi?

The OCCRP report said that the documents show that through the Mauritius funds, Ahli and Chung-Ling “spent years buying and selling Adani stock through offshore structures that obscured their involvement – and made considerable profits in the process”. “They also show that the management company in charge of their investment paid a Vinod Adani company to advise them in their investments.”

The trove of documents lays out a complex web of companies that date back to 2010, when Chung-Ling and Ahli began setting up offshore shell companies in Mauritius, the British Virgin Islands and the United Arab Emirates.

Four offshore companies established by them sent hundreds of millions of dollars into a large investment fund in Bermuda called Global Opportunities Fund (GOF), with those monies invested in the Indian stock market from 2013 onwards.

Another layer of opacity was introduced as the money from the duo’s offshore companies flowed from GOF into two funds to which GOF subscribed: Emerging India Focus Funds (EIFF) and EM Resurgent Fund (EMRF).

These funds then appear to have spent years acquiring shares in four Adani-listed companies – Adani Enterprises, Adani Ports and Special Economic Zone, Adani Power and Adani Transmission.

What was the legal violation?

The OCCRP report sought to know if the funds raised by Chung-Ling and Ahli should be classified as promoter group, which would potentially lead to a breach of listing regulations.

The rules provide that 25 per cent of a company's shares must be kept 'free float' or available for public trade on the stock exchange – while 75 per cent can be held by promoters. Vinod Adani has recently been acknowledged by the conglomerate as a promoter and so holding of funds controlled by him should be classified as a promoter group, OCCRP said.

The OCCRP report said that if Ahli and Chang are considered to be acting on behalf of Adani promoters (Vinod Adani in this case), “their stake in the Adani Group would mean that insiders altogether owned more than the 75 per cent allowed by law." This was a clear violation of listing law, it said.

“When the company buys its own shares above 75 per cent...it’s not just illegal, but it’s share price manipulation,” OCCRP quoted Arun Agarwal, an Indian market specialist and transparency advocate, as saying. “This way the company [creates] artificial scarcity, and thus increases its share value — and thus its own market capitalization.”

“This helps them gain an image that they are doing very well, which helps them get loans, take valuations of companies to a new high, and then float new companies,” he added.

What's the Dubai connect?

The paper trail that links Ahli and Chung-Ling to Vinod Adani, and leads them all to a Bermuda fund provided by 360 ONE, can be traced back to Dubai in July 2009.

The report said that there was no evidence of Chung-Ling and Ahli's money for their investments coming from the Adani family, but said its investigation showed there "is evidence" that their trading in Adani stock "was coordinated with the family".

“The Adani Group’s rise has been staggering, growing from under USD 8 billion in market capitalisation in September 2013 – the year before Modi became prime minister – to USD 260 billion last year,” it said.

What's Adani Group saying?

Categorically denying the allegations, the Adani Group called them “recycled” ones and “yet another concerted bid by (George) Soros-funded interests supported by a section of the foreign media to revive the meritless Hindenburg report”.

On the allegation of about USD 1 billion of over-invoicing scam money being routed to the two Mauritius funds, it said, “These claims are based on closed cases from a decade ago when the Directorate of Revenue Intelligence (DRI) probed allegations of over-invoicing, transfer of funds abroad, related party transactions and investments through FPIs.”

It said that an independent adjudicating authority and an appellate tribunal had both confirmed that there was no over-valuation and that the transactions were in accordance with applicable law.

It added that the matter attained finality in March 2023 when the Supreme Court of India ruled in the group's favour.

“Clearly, since there was no over-valuation, there is no relevance or foundation for these allegations on transfer of funds,” the company said.

The foreign portfolio investors named in the OCCRP report “are already part of the investigation by SEBI", Adani Group said.

"As per the Expert Committee appointed by the Hon'ble Supreme Court, there is no evidence of any breach of the Minimum Public Shareholding (MPS) requirements or manipulation of stock prices." "These attempts are aimed at, inter alia, generating profits by driving down our stock prices and these short sellers are under investigation by various authorities. As the Supreme Court and SEBI are overseeing these matters, it is vital to respect the ongoing regulatory process," it said.

Separately, 360 ONE Asset Management (Mauritius) Ltd said it is the investment manager for Emerging India Focus Fund and EM Resurgent Fund.

Both funds "are fully compliant broad-based funds registered with Financial Services Commission, Mauritius," it said in an exchange filing.

"In neither of these two funds, the Adani group or any of the individuals mentioned in the (OCCRP) article, are investors. These funds as on date have zero investments in any of the shares of the Adani Group." It said that in the past among many other portfolio investments; the funds have had investments in shares of Adani Group companies; all of which were sold in 2018.

While Adani Group accuses the OCCPR report to be backed by billionaire advocacy funder George Soros, OCCPR’s website says that Soros’s Open Society Foundations is one of its key funders.

What did the Hindenburg report say?

Hindenburg had alleged corporate fraud and stock price manipulation at the conglomerate and raised questions on Vinod Adani's role.

The Group had denied Hindenburg allegations, which wiped close to USD 150 billion in the market value of the group at its lowest point and cost Gautam Adani his prime spot on the world rich list and had stated that Vinod Adani has "no role in the day-to-day affairs" of the company.