Adani Group stock loses Rs 35,000 crores in market cap after investigative report

On August 31, Adani Group stocks fell 3-4% following new allegations from the non-profit Organized Crime and Corruption Reporting Project (OCCRP) that the family used secret Mauritius funds to buy their own shares. This allegation comes after New York base short seller Hindenberg released its report this January 

The Adani Group has said the report's claims are wrong and are based on old cases that were settled a decade ago, further, SEBI is investigating Foreign Portfolio Investment (FPI’s) in Adani stock.

Allegations on Adani Group:

The report indicates that they used Mauritius funds to secretly trade Adani shares and profit from it. A company owned by Vinod Adani was also paid for investment advice.

 Two members Nasser Ali Shaban Ahli and Chang Chug-Ling have long-term ties with the Adani family and have also served as directors and shareholders of the Adani company, spending years buying and selling Adani group stocks through offshore structures and making profits. For more in-depth details on the report, click here 

These claims are based on the closed cases when the Directorate of Revenue of Intelligence (DRI)   which involved allegations like invoicing, transfer of funds abroad, transitions by related parties, and investments through FPIs. Later in March 2023, the Supreme Court of India ruled in favor of the Adani group ruling that there was no over-valuation, and no relevance was found for these allegations on the transfer of funds. Click here

Following these allegations, SEBI said last week that its ongoing investigation was nearing completion as some entities were located in tax haven jurisdictions.

Past Allegations:

Adani companies have a lot of debt and are taking on more than they can handle. This could make it difficult for them to pay back their debts, and they also have a lot of short-term liabilities that they need to pay back soon. This could put them under financial pressure in the near future as per the reports released by Hindenburg this January.

SEBI had its suspicions for years that some of the Adani Group's public shareholders were not really public shareholders at all, but were instead just proxies for the Adani Group's promoters. In 2020, SEBI launched an investigation into 13 overseas entities that held Adani stock to try to get to the bottom of this.

Multiple Adani Group stocks took a nosedive following the recent report. Here is how the stocks performed:

(As of 31 August 2023)

Reacting to the news, some technical analysts say that it would be better to avoid taking any short-term position in these stocks due to possible short term-volatility.