The Adani Saga: The need for a new governance strategy or a financial faux pa?

Adani Group has 7 key listed companies with a collective market value of $218 B. Adani private companies and family trusts hold these companies along with the retail shareholders.

Adani Group – a diversified business, globally – has businesses in ports & logistics, energy, airport, agribusiness, real estate, defence & aerospace, financial services, mining, data centers, and highways. Some of their businesses include:

  1. Largest private port operator in India and operating several ports – Mundra, Dahej, and Hazira
  2. Operating several thermal and renewable power plants in India and investment in coal mining operations in Australia
  3. Operate and manage several airports in India – Ahmedabad, Lucknow, Jaipur, Guwahati, Thiruvananthapuram, and Mangaluru
  4. Setting up a joint venture with Saab to manufacture fighter jets in India.
  5. Adani Capital, the financial arm of Adani Group, provides financial services such as corporate finance, project finance, and structured finance

Here is a snapshot of Adani Group companies and their market capitalisation:

(Source: Bloomberg)

**Adani Wilmar performance is since February 2022 IPO

There have been various allegations of regulatory lapses, denied by the Adani Group, but caused Gautam Adani to lose his title of 2nd richest man in the world, losing almost $120B of his net worth after the claims of market manipulation and financial fraud by the Hindenburg Research (“Research“) surfaced in media reports.

The allegations concern, related party transactions, money laundering activities, and stock value manipulation. Some major concerns highlighted in the Research are:

1. The 7 key listed Adani stocks have 85% downside purely on a fundamental basis owing to sky-high valuations. These stocks are overvalued compared to industry peers and market analysis, representing growth similar to high-growth tech companies

2. Substantial debt availed by individual companies of the Adani Group and pledging of the inflated stocks for loans by Promoter Group as collateral is a cause of concern for rating companies. Failure to repay debt and insufficient collateral may lead to liquidation of the shares, causing volatility in the market value.

3. The Adani Group listed entities are highly leveraged compared to industry standards, resulting in current ratios below 1, implying a short-term liquidity risk. The group companies are interdependent, and one credit risk or performance failure can trigger a cascading impact on the other companies.

In Adani Green Energy Limited Offering Circular, it was highlighted “Members of our Group have from time to time breached, and may in the future breach, certain covenants and obligations under existing financial arrangements. …”

4. The Adani Group has been a focus in previous government investigations concerning fraud, money laundering, theft of taxpayer funds and corruption, totalling an estimated $17 B. Cause of investigations range from being awarded contracts without a fair bidding process to being engaged in circular trading of cut and polished diamonds in order to illegally claim $ 151M at the time in illegitimate export credits. Though these investigations were not concluded, it is believed to be stonewalled or delayed owing to the political connections of the promoters of the Adani Group.

5. Rajesh Adani, Founder Gautam Adani’s younger brother, has been arrested at least twice (in 1999 and 2010) over separate allegations of forgery and tax fraud. He was subsequently promoted to Managing Director of Adani Exports (later renamed Adani Enterprises). This makes the entity a high-risk business partner, considering alleged tax fraud is one of the red flags highlighted during due diligence and risk assessment.

6. Samir Vora, Founder’s brother-in-law, was alleged to spearhead a scheme concerning the Diamond scam, which involved the Adani Group, and was accused of making false statements. However, no severe consequences followed the alleged inaccuracies in testimonies. Instead, Samir was promoted as Executive Director of Adani Australia from April 2017. 

7. Vinod Adani, Founder’s elder brother, has regularly been found at the center of the government’s investigations into the Adani Group for his alleged role in managing a network of offshore entities used to facilitate fraud. Though Vinod Adani does not hold any formal positions in the Group as of date, he is said to be actively involved in managing and negotiating international finances and connections for the Adani Group.

8. Approximately 38 Mauritius Shell Entities have been established by Vinod Adani and associates, which assist in investing money in the listed Adani entities.

Entities in Cyprus, the UAE, Singapore, and the Caribbean associated with Vinod Adani were also identified, comprising a vast empire of shells. Many of these entities later appear in suspect transactions, often funnelling assets into or out of the Adani Group companies. A private entity seems to have been used to help listed Adani Enterprises avoid reporting losses, bolstering the appearance of its reported earnings, according to the Research.

9. The shell entities mainly assist with two functions –

  • Stock parking/stock manipulation
  • laundering money through Adani’s private companies onto the listed companies’ balance sheets

These two functions carried out mainly through undisclosed related party transactions allow the listed entities to display a healthy balance sheet, validate shareholders’ confidence and maintain the appearance of solvency, though the transactions, if monitored by regulators, would be red flags and be treated as instances of money laundering.

10. The Research also highlighted the concern with the Independent Auditors (“IA”) appointment for Adani Enterprises and Adani Total Gas. The IA is a firm with 4 partners and a total of 11 employees. The partners were only 23-24 years old when they started approving financials for the current $100B combined market cap companies.

Owing to the extensive market cap, it is ideally expected to entrust well-known external auditing firms to oversee the transactions and provide an unbiased and fair statement of affairs. However, the Adani Group chose to entrust only some of the listed entities to Big4 accounting firms to audit.

In FY 22 audit report for Adani Power, Auditor SRBC, an EY affiliate, provided a “qualified” audit opinion – explaining that “material weakness has been identified in the Company’s internal financial controls over financial reporting” in its most recent annual audit, relating to the valuation of certain assets connected to its power plant in Mundra.

11. Promoter holding has been restricted to 75% to ensure publicly traded companies have liquidity at all times. 4 of the listed Adani entities are on the brink of delisting for breaching the 75% limit of promoter holding. The following promoter holding was published with BSE:  

a. Adani Transmission (74.19%)
b. Adani Enterprises (72.63%)
c. Adani Power (74.97%)
d. Adani Total Gas (74.80%)
e. Adani Wilmar (87.94%)

12. Funds held by the public in listed Adani entities showcase irregularities such as being held by Mauritius or offshore-based entities, often shells or with beneficial ownership concealed via nominee directors or with little to no diversification, holding portfolios almost exclusively consisting of shares in Adani listed companies.

Investment banks and professional investors have steered clear of listed Adani entities, with minimal to no sell-side coverage in many Adani stocks. Except for Adani Ports, other listed Adani companies are severely underfollowed relative to peers of similar market capitalization.

Domestic Active Mutual Fund Managers are skeptical about holding multiple key Adani stocks in significant size, thereby affecting the market standing of the stocks.


SEBI has submitted its response in a filing to Supreme Court, stating that it is enquiring into the allegations made in the Research and the market activity immediately preceding and post the publication of the report to identify violations of SEBI regulations.

In July 2021, SEBI also released a media statement confirming that it asked for ultimate beneficial ownership from the Adani entities. However, the RTI petitions detailed in the Research show that no conclusive action was taken for the default.


The allegations in the Research triggered a fall in the Adani stock price, severely impacting ESG Funds where Adani stocks appear in more than 500 Article-8 funds, raising questions on how well the policies are implemented to promote environmental, social, and governance goals under European Union rules.  

Bloomberg News reported that the Adani Group is said to have halved its revenue growth target and delayed capital spending plans. However, the Adani Group has given a media statement confirming that all companies have a healthy cash flow and that there was no material refinancing risk and near-term liquidity requirement as there is no near-term significant debt maturity.

On the other hand, the announcement of a net profit of nearly $100M for the October to December quarter of FY 22, against a loss of $1.5M in the same period of FY 21 by Adani Enterprises, helped recover some decline in the stock value.   


The stock value has seen a considerable decline over the last few weeks, especially after the release of the Research, but the persons in charge have jumped in and tried to do damage control. The Adani Group took the following actions:

a. denied allegations of the Research in a 400 page rebuttal;promised implementation of a better governance system, including appointment of a financial controller to oversee the private companies and funds which hold shares in listed Adani entities
b. on February 6, 2023, the founders prepaid loans worth $1.11 B to release pledged shares across three Adani firms
c. the Group plans to prepay a $500 M bridge loan due next month
d. sufficient cash flow was confirmed with the announcement of Adani Enterprises’ financial result.


It’ll be interesting to watch how the political influence plays out – whether causing a deterrence in the investigations or fuelling a detailed probe due to the opposition’s stand on the issue.

This is only for informational purposes. Nothing contained herein is, purports to be, or is intended as legal advice and you should seek legal advice before you act on any information or view expressed herein. Endeavoured to accurately reflect the subject matter of this alert, without any representation or warranty, express or implied, in any manner whatsoever in connection with the contents of this. This isn’t an attempt to solicit business in any manner.



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