The Story of Adani Scam - Full Case Study

Anik Banerjee Anik Banerjee
Jun 16, 2021 5 min read
The Story of Adani Scam - Full Case Study

Adani Group is not just a name, it is one of the most popular brands from India that enjoys a towering reputation amongst the companies hailing from the subcontinent. Adani Group was founded by Gautam Adani back in 1988 in Ahmedabad, Gujarat. Starting initially as a commodity trading business with its flagship company Adani Enterprises Limited, the group has grown to a multinational conglomerate of high repute.

Gautam Adani’s brand now boasts of an annual revenue of over US$ 13 billion and exercises its operations across 70 locations in 50 countries. Furthermore, Adani Group is also famous for being India's largest port developer and operator, having around ten ports and terminals under its wing that includes Mundra Port, its largest.

With the help of the promising services that Adani Group has delivered throughout the years and the growth that the company has witnessed, the president of Adani Foundation, Gautam Adani has scaled up the ladder to become the second richest person in Asia.

However, the success story of Gautam Adani and the brand he built seems to be on unstable grounds lately after NSDL froze three main FPI accounts that have funded the organization.

What happened to Adani Group?
When did it happen?
What happened as a result of the freeze on Adani’s Foreign Funds?
Why were Adani’s FPIs frozen?
What did Sucheta Dalal tweet and why did it become a sensation?

What happened to Adani Group?

According to the latest reports, National Securities Depository Limited (NSDL) froze three of the primary foreign funds of the group namely, Albula Investment Fund, Cresta Fund, and APMS Investment Fund. All of these companies are apparently registered in Port Louis, Mauritius, with Albula and APMS sharing the exact same address in Mauritius. These three funds together own shares worth Rs 43,500 crores of the four companies listed under the parent organization.

When did it happen?

Though it was only on June 14, Monday that news made to the headlines of almost all the major media channels and websites as per the depository's website, these accounts were frozen on or before May 31.

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What happened as a result of the freeze on Adani’s Foreign Funds?

As soon as the FPI accounts worth Rs 43,500 crores were seized by NSDL on Monday, June 14, 2021, the shares of Adani started to decline. The shares of Adani Enterprises witnessed a 24.99 % drop and were valued at Rs 1,201.10, whereas Adani Ports and Special Economic Zone tanked by 18.75 % to be valued at Rs 681.50 on the BSE.

Adani Enterprises share Price
Adani Enterprises Share Price

Why were Adani’s FPIs frozen?

It is apparent that the shares of Adani fell as an obvious result of the freezing of the company’s foreign funds but the reason that led to the freeze is still wrapped in mystery.

According to some of the top officials at custodian banks and law firms, the freeze came as a result of insufficient disclosure of information regarding beneficial ownership as per the Prevention of Money Laundering Act (PMLA).

SEBI had reformed the know your customer (KYC) documentation required for FPIs as per PMLA in 2019. For the existing funds, SEBI granted them time till 2020, post which they needed to comply with the new norm and failing that will result in freezing their Demat accounts, which might be the case with Adani Group.

Furthermore, SEBI is also reported to be investigating the stocks of Adani Group, which have gained between 200% and 1000% in the past year, in order to check if there was a price manipulation in them or not. The probe was initiated in 2020, sources said, while SEBI denied mentioning anything else on that matter.

The new rules of the revamped KYC documentation for FPIs included that they need to submit some additional details that will contain the disclosures on common ownership and personal details of the chief employees of the fund like fund managers.

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What did Sucheta Dalal tweet and Why did it become a sensation?

Though the actual reason behind the recent drop of Adani can somewhat be traced to the freezing of the primary foreign funds of the company, Sucheta Dalal’s recent tweet, though cryptic in nature, seems to visibly coincide with the falling of Adani shares. Soon after which the netizens from all around the country and abroad started to take great interest in that matter, which resulted in flooding Twitter and Facebook with a world of posts, tweets, and memes.

Here’s the tweet that Sucheta posted:

Sucheta Dalal resorted to anonymity but there were clear indications that it pointed to SEBI’s ongoing investigations of the Adani Group, its FPIs, and the sudden rise of its stock prices. The prices of the stocks of Adani went down in less than two days after Dalal’s tweet, which instantly caught the attention of the netizens and resulted in these memes:

Some memes from Twitter:

Sucheta Dalal’s tweet that coincided with the recent move of the stock market was also compared to that of Elon Musk's tweet, which pulled down the cryptocurrency industry last month. This incident has also earned Dalal, the Padma Shri awarded journalist, who was famous for her contributions on the Harshad Mehta scam, Enron scam, the Industrial Development Bank of India scam, and more, the title of “Elon Musk of Indian stock market” on popular social media platforms.


Who is Adani?

Gautam Adani is an Indian billionaire industrialist and philanthropist who is the chairman and founder of the Adani Group, his estimated net worth is 7,080 crores USD.

What companies does Adani own?

Gautam Adani owns Adani Enterprises, Adani Ports & SEZ, Adani Green Energy, Adani Power, Adani Transmission and Adani Total Gas.

What is the Net worth of Gautam Adani?

The net worth of Gautam Adani is estimated to be around 7,080 crores USD.

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