Adani-Hindenburg saga: Two Mauritius firms in report were under I-T lens

In its Adani report, Hindenburg Research named five Mauritius-based companies that collectively held sizeable stakes in Adani group companies over one and a half decades

At least two Mauritius companies that made investments in Adani group companies and were mentioned in the Hindenburg Group's Adani report were under investigation by the Indian tax authorities for more than ten years, a report by the Indian Express said.

As the Securities and Exchange Board of India (Sebi) was granted an additional three months from the Supreme Court (SC) earlier this month to complete its investigation, records obtained during the 2017 Paradise Papers investigation reveal that Mavi Investment Fund Ltd (now APMS Investment Fund Ltd) had received a notice from the Mauritius Revenue Authority (MRA) in September 2012.

This notice was intended to share information and to be forwarded to the Indian tax authorities under the Direct Tax Avoidance Agreement, it said.

Another company, Lotus Global Investment Limited, which began investing in Adani Group companies in 2005, received a similar notice from MRA in July 2014 to share "information... for onward transmission to the Indian Tax Authorities." These records were kept internally by the offshore law firm Appleby.

In its report, Hindenburg Research identified five Mauritius-based companies that collectively held sizeable stakes in Adani group companies over one and a half decades.

These companies were APMS Investment Fund (previously Mavi Investments), Albula Investment Fund, Cresta Fund, LTS Investment Fund, and Lotus Global Investment Fund, under the control of Monterosa Investment Holdings (BVI), an alleged "stock parking entity".

According to the expert committee established by the SC, four of these companies were among the 13 overseas entities that market regulator Sebi has been looking into since October 2020.

"The foundation of Sebi's suspicion that led to investigations into the ownership of the overseas entities is that they have 'opaque' structures because the ultimate chain of ownership above the 13 overseas entities is not clear," the committee noted. Sebi, on the other hand, drew a blank.

Records show that Appleby charged Monterosa in August 2010 for amending and recording fund documents for Cresta, Lotus, Mavi, and other companies "so that there is only one common portfolio of assets for the Sebi declaration/undertaking."

Mavi's payment of Rs 10 lakh towards the settlement fees for violating Sebi regulations was accepted by Sebi in May 2010. Both Adani Transmission and Adani Total Gas are owned by Mavi (as APMS) to the tune of 1.86 and 2.72 per cent, respectively. In Adani Green Energy, it owned 1.19 per cent till 2021.

Mavi started investing in Adani Enterprise Limited (AEL) in 2006 but withdrew last year. In 2013, the company sold its entire Adani Power Limited (APL) stake to Vinod Adani, elder brother of Gautam Adani, in three block deals.

In December 2009, Albula (Mauritius), a company under the Monterosa banner, purchased the stake Lotus Global had in APL. From a peak of 4.51 per cent in 2008 until its exit in the second quarter of 2010, its stake in AEL was gradually reduced.

In July 2014, MRA asked that Lotus Global provide audited financial statements for the years 2006 to 2012, which roughly corresponds to the time when Lotus Global held stakes in Adani companies, as well as information on shareholders and beneficial owners, the number of employees, bank statements for the years April 2000 to March 2013, sources of credits, and information on debit entries in the accounts.

Executives and legal counsel for Monterosa, Appleby, and related companies decided to petition the Supreme Court of Mauritius to pre-empt any attempts to obtain information directly from the banks — Deutsche Bank, HSBC, and Bank of Mauritius — where Lotus Global held accounts.

“The Applicant has received subscription monies of several hundred million USD and placed thousands of dedicated portfolio investment trades with a turnover in excess of USD 2 billion over the years… The request for information is drafted extraordinarily wide and vague… part of a mere fishing expedition of the Indian Tax Authorities…,” read a draft affidavit seeking an injunction to restrain MRA from summoning the bank officials.

Earlier in 2012, Mavi was asked to provide ownership information, bank statements from April 2007 to March 2010, and to confirm whether the company had made investments in Delphi Investment Ltd, which led to investments in Etisalat DB Telecom Pvt Ltd (formerly Swan Telecom Private Limited) as part of the investigation into the 2G scam.

In response, Mavi named beneficiaries from 11 entities in Bermuda, Cayman, and Ireland. This was in line with Mavi's refusal to name the fund's beneficial owners to the Sebi on the grounds that those investors were banks and financial institutions who "have a large number of investors who keep changing on a daily basis."

After failing to prove "decisively" charges of market manipulation, the Sebi lifted the ban it had placed on Mavi in September 2013.