The Organized Crime and Corruption Reporting Project (OCCRP), a global network of investigative journalists, recently reported that people with ties to the Adani family secretly held significant stakes in group entities in possible violation of the country’s law on maximum ownership by promoters in listed entities, through some of these funds.
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Coincidentally, the closure of some these funds—two Mauritius-based funds were shuttered last year, and a third is in the process of winding up—follows the initiation of an investigation by the markets regulator into offshore entities’ holdings in Adani group companies in 2020.
The developments suggest that an early move by Sebi to investigate the now-shuttered entities would have helped the regulator determine whether they played a role in manipulating Adani group stocks. With the closure of these funds, Sebi now faces increased difficulty in accessing information regarding the ultimate beneficiaries of these entities.
At least two regulatory experts said that the closure of such publicly pooled funds in a relatively short time is surprising, given that typically they have longer lifespans.
For instance, the Bermuda-registered Global Opportunities Fund, registered on 6 January 2005, was shut on 12 December 2006, according to regulatory filings in the island country.
Mauritius-based Assent Trade and Investment Pvt. Ltd, set up in April 2010, turned defunct in June 2019. Lingo Trading & Investment Pvt Ltd, incorporated in December 2009, closed in March 2015. Mid East Ocean Trade & Investment Pvt. Ltd was set up in September 2011 and closed in August last year.
EM Resurgent Fund was set up in May 2010 and shut down in February last year. Asia Vision Fund, set up in May 2010, appointed liquidators on 20 April 2020 and is in the process of winding up, according to filings reviewed by Mint.
A seventh fund, Emerging India Focus Funds, which was set up on 19 May 2008, continues to be active. Details pertaining to Gulf Asia Trade and Investment, registered out of the United Arab Emirates, could not be ascertained.
“There shouldn’t be a problem if the fund was wound up less than two years ago, but information regarding the ones that were liquidated before would be difficult to obtain (for Sebi),” said an executive at a Big Four consulting firm. This is because most overseas regulators maintain records of funds for only a limited period of time, the executive said.
In its report submitted to the Supreme Court last month, an expert committee appointed by the apex court said the markets regulator faced difficulty in accessing information about the beneficial owners of overseas funds, adding that pursuing the identity of offshore shareholders was “potentially a journey without destination.”
Funds registered out of countries like Mauritius are required to share scant financials with the regulator and use a so-called ‘feeder fund’ structure.
“The problem is when a fund which is registered in countries like Mauritius is shut down, typically its feeder funds that could be registered in financial tax havens like Cayman Islands or Luxembourg are also deregistered,” said the executive cited above.
“Very few public market funds are close-ended that come with specific fund tenure; if such tenure elapses, then the fund may wind up. While this is common in private market funds like venture capital, in public markets, such close-ended funds are fewer,” said a Mumbai-based lawyer, who counts clients that include foreign investors.
Experts say a fund is closed when it goes bankrupt, or when it gets acquired and the new owner transfers the fund’s assets, or when the investors decide to close it.
A questionnaire sent to a Sebi spokesperson remained unanswered. Adani group did not respond to a request for comment.
OCCRP reported that individuals with links to Adani Group had ties to these funds. Chang Chung-ling, a Taiwanese national, was on the board of Lingo Trading and Investment Pvt. Ltd, while Ahli Nasser Ali Shaban, a businessman from the UAE, owned Mid East Ocean Trade and Investment Pvt. Ltd. Vinod Adani, brother of group chairman Gautam Adani, was a director of Assent Trade and Investment Pvt. Ltd.
Current and former executives of 360 One Asset Management (Mauritius) Ltd, formerly called IIFL Asset Management (Mauritius) Ltd served as a director at Emerging India Focus Funds, Asia Vision Fund and EM Resurgent Fund.
“360 ONE Asset Management (Mauritius) Ltd, a wholly owned subsidiary of 360 ONE WAM Ltd, was the investment manager for Emerging India Focus Funds, EM Resurgent Fund (now closed) and Asia Vision Fund (till 2018),” said a spokesperson for the company. “At no point was 360 ONE the beneficiary owner of any of these funds.”
A 2014 probe by the Department of Revenue Intelligence, a federal anti-smuggling agency, found that some Adani Group entities based in UAE over-invoiced the power equipment imported from China and used the proceeds to invest in funds. The Financial Times reported that one such entity, Electrogen Dubai, has put $100 million in Assent Trade and Investment, which used the Asia Vision Fund to invest in stocks.
Three other entities, Lingo Trading & Investment Pvt. Ltd, Gulf Asia Trade and Investment and Mid East Ocean Trade and Investment, had bought Adani Group shares through two Mauritius-registered entities, EM Resurgent Fund and Emerging India Focus Funds.