Firm linked to Adani investors in Mauritius lost licences in May 2022, says report

Mauritian financial regulator Financial Services Commission (FSC) had revoked the business and investment licences of Emerging India Fund Management Ltd (EIFM), the controlling shareholder of two foreign funds that invested in listed Adani companies in India, a report said on Saturday. 

The licences were quashed in May 2022, much before US-based short seller Hindenburg Research levelled charges against the port-to-energy conglomorate. The companies are now under probe, the Indian Express reported.

The FSC Enforcement Committee alleged breach of several provisions of laws by EIFM, which are meant to curb money laundering and ensure corporate governance.

The FSC, in its licence revocation notice issued on May 12, 2022, stated that EIFM “acted in breach” of various sections of the Financial Services Act, the Securities Act, the Financial Intelligence and Anti-Money Laundering Regulations (2003 and 2018) and the Code on the Prevention of Money Laundering and Terrorist Financing. The copy of the notice is available on the regulator’s website.

 

According to the notice, the breaches are related to non-compliance on maintaining records of clients and transactions, accounting and auditing standards; safeguards against dummy officers; corporate governance and the prescribed internal mechanism to identify risks of money laundering and terrorist financing.

It is to be noted that Emerging India Focus Funds and EM Resurgent Fund are two of the 13 overseas Adani investors under investigation under the Prevention of Money Laundering Act (PMLA), SEBI records show.

The revocation of licences means EIFM, effectively, began winding down operations, the report said.

A FSC spokesperson quoted in the report said: “When a licence is revoked, it is on a permanent basis. Following the revocation… licensees are directed to initiate the necessary actions for the orderly dissolution of their business and the discharge of their liabilities.”

The EIFM, incidentally, found no mention in the Hindenburg report. According to the FSC, EM  Resurgent Fund was dissolved in February 2022 while Emerging India Focus Funds is a live company.

When asked about the issue, an Adani Group spokesperson said: “We will not be able to comment on matters pertaining to independent individual shareholders.”

After the Hindenburg report was made public this January, a top official of the Mauritian FSC had said that an “initial assessment” of the entities associated with the Adani Group in Mauritius did not reveal any breach of law.

When asked if EIFM was part of that assessment, an FSC spokesperson said the FSC “is unable to share any further information on this matter since it is constrained by the provisions of the FSA in its ability to share confidential information about its licensees.”

Significantly, EIFM was held guilty of breaching both the 2003 and 2018 versions of Mauritius’s Financial Intelligence and Anti-Money Laundering Regulations.

During March-April 2018, as per last available records, EIFM’s two Mauritius funds held 3.9 per cent of Adani Power Limited, 3.86 per cent of Adani Transmission Limited, and, at least, 1.73 per cent of Adani Enterprise Limited, the report said.

 

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In January this year, the Hindenburg Research  alleged accounting fraud, stock price manipulation and improper use of tax havens by the Adani group companies, which triggered a $150 billion rout in the group market capitalisation earlier this year.

Last month, Sebi informed the Supreme Court through a status report that it had completed the probe in 22 of the 24 matters against the Adani group and is awaiting information from five tax havens on the actual owners who had invested in its group firms.

The markets regulator has been looking into three areas as per the remit given bythe top court — whether there has been any violation of the minimum public shareholding (MPS) norms; whether there has been any failure to disclose transaction with related parties; and any manipulation of stock prices in contravention of laws.

On the MPS matter, while the allegation is that the Adani group has not complied with the rule as overseas proxies have invested in its group firms, Sebi said its investigation covered 13 overseas entities, 12 foreign portfolio investors and one foreign entity.

As many of the entities linked to these foreign investors are located in tax haven jurisdictions, establishing the economic interest shareholders of the 12 FPIs remains a challenge.

The time period for investigation into this allegation was between April 1, 2016 and September 30, 2020.

In August, after Hindenburg, the Organised Crime and Corruption Reporting Project (OCCRP) made fresh allegations of stock manipulation against the Adani Group.

OCCRP’s report, published on August 31, claimed that exclusive documents obtained by it show that “in at least two cases … [supposedly public] investors turn out to have widely reported ties to the group’s majority shareholders, the Adani family”, and helped manipulate Adani companies’ stock prices.

Rejecting the claims, the Adani Group said the OCCRP allegations were yet another concerted bid by George Soros-funded interests supported by a section of the foreign media to revive the meritless Hindenburg report and malign the reputation of the Group.

Shares of flagship company, Adani Enterprises Ltd, closed at Rs 2,538.90, up by 0.77 per cent, on Friday.
 

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