The market regulator and customs authorities are investigating Adani Group for non-compliance of rules, the government told Parliament last week. While the Securities and Exchange Board of India (Sebi) is investigating some of the companies “with regard to compliance with Sebi regulations”, the Directorate of Revenue Intelligence (DRI) is probing “certain entities belonging to the Adani Group of Companies under laws administered by it", Minister of State for Finance Pankaj Chaudhary said in a written reply to a question.
He, however, added that the Enforcement Directorate (ED) was not probing these companies. Chaudhary said the accounts of three of the six Mauritius-based funds that invested most of their money in Adani Group firms were frozen in 2016 over the issuance of Global Depository Receipts (GDR) by certain listed firms. The funds included Albula Investment Fund, Cresta Fund, and APMS Investment Fund. No freeze was, however, ordered for their holding in other firms.
Sources said that Sebi was looking into the holding structure of the three funds, while the DRI was investigating Adani Power and other group firms in connection with the “over-invoicing” of imported coal and power plant equipment. While the minister cited the Sebi probe, a clarification was earlier issued by the National Securities Depository (NSDL) that these accounts were not frozen in the case of Adani companies.
In a statement later in the day, Adani Group said it had cooperated with Sebi in the past, and that it was yet to receive any further communication or information requests. “We have always been transparent with all our regulators and have full faith in them. While we have always been fully compliant with applicable Sebi regulations, we have made full disclosure to Sebi on specific information requests from them in the past. However, we have not received any communication or information requests recently," the statement said.
“With regard to the DRI matter, it issued a show-cause notice to Adani Power, about five years back. Subsequently, the DRI passed an order in favour of Adani Power, confirming that there is no over-valuation of equipment. The department has approached the tribunal and the matter stands sub judice," it added.
The DRI is currently investigating two separate cases against Adani companies. The one against Adani Power, where it had issued a show-cause notice in 2014, is with the DRI’s adjudicating tribunal. The DRI notice had come after it investigated three Adani Group companies involved in the import of power generation equipment. The DRI had alleged significant overvaluation of the imports. Subsequently, it had issued two more show-cause notices to other group firms, alleging similar overvaluation in their transactions.
The overvaluation of power equipment allows firms to make a case for artificially raising tariffs before the Central Electricity Regulatory Commission or state regulatory commissions. Ultimately, this affects consumers, who have to pay a higher cost for power.
The second case that is against a few Adani companies is for alleged invoicing of coal imports between 2011 and 2015. The matter went to the Supreme Court, which in January 2020 had stayed the Bombay High Court order quashing the letters rogatary sent by the DRI to its foreign counterparts to get judicial assistance in the matter involving alleged overvaluation of Indonesian coal imports.
