There’s Evidence That The Adani Group Likely Bought Into Its Own $2.5 Billion Share Sale

Two companies with alleged ties to Adani underwrote Adani Enterprises’ stock offering this week.

Two companies accused by Hindenburg Research of assisting the Adani Group in its alleged conspiracy of accounting fraud and stock market manipulation were underwriters in Adani Enterprises’ $2.5 billion share offering Monday, which was abruptly cancelled on Wednesday.

Elara Capital (India) Private Limited, a subsidiary of London-based investment firm Elara Capital, and Monarch Networth Capital, an Indian brokerage firm, were two of the 10 underwriters disclosed by Adani Enterprises in its offer agreement for the sale.

Elara Capital’s India Opportunities Fund, an offshore vehicle that holds $3 billion worth of publicly traded stock in Adani companies (including Adani Enterprises), serves as one of Adani’s “stock parking entities” to skirt Indian regulations, according to allegations from Hindenburg Research.

Monarch Networth Capital, an Indian brokerage firm, has been partially owned by the privately held Adani Properties Private Limited since 2016, according to Hindenburg’s report. Albula, an offshore fund identified by Hindenburg as a proxy of Adani’s, held a 10% ownership stake in Monarch in 2009, according to ownership records cited by Hindenburg.

According to Adani Enterprises’ published offering statement, Elara Capital’s responsibilities in the share offering consisted of “drafting and approval of all publicity material” while Monarch was tasked with “non institutional marketing” to investors.

The fundraising effort, which Adani Enterprises first announced in Novemberwas thrown into chaos on January 24 when Hindenburg Research published its 100-page reportwhich alleges a years-long conspiracy by the Adani Group to commit accounting fraud and enrich its principals through stock market manipulation. The Adani Group has denied Hindenburg’s report and threatened legal action against the U.S. investment firm, but shortly after this story was first published, Adani Enterprises canceled the offering and said it will refund investors.

Abu Dhabi’s IHC investment firm salvaged the offering with a last-minute injection of $400 million, reportedly with a nudge over the phone by Gautam Adani himself. Two other Indian tycoons, steel mogul Sajjan Jindal and telecom billionaire Sunil Mittalalso subscribed to the follow-on offering in “a last-minute push” the Economic Times and the Financial Times reportedciting sources familiar with the matter.

The involvement of Elara Capital and Monarch Networth Capital, however, raises questions about whether any of Adani’s personal funds were deployed to help meet the $2.5 billion target.

“The only way Adani can actually resolve this issue is to illustrate who did buy all of the shares,” says Tim Buckley, a former investment banker at Citigroup and director at Australia-based Climate Energy Finance, who has been studying the Adani Group for over a decade. “It would be my speculation that there were insiders.”

U.S. hedge fund billionaire Bill Ackman also expressed skepticism about the share offering on Wednesday, tweeting: “I would not find it surprising if the @AdaniOnline offering was rigged with affiliated buyers.”

The Adani Group, Elara Capital and Monarch Networth Capital have not responded to Forbes’ requests for comment as of press time.

Ramnish Kochgave, president of investment banking at London-headquartered Elara Capital Plc., (according to his LinkedIn profile and Elara’s website) signed on behalf of Elara Capital (India) Private Limited in the Adani Enterprises’ offering document. That entity was incorporated in the Indian state of Maharashtra in 2006. The London-based parent company also controls, according to its websitea second, similarly named entity, Elara Finance (India) Private Limited, which was incorporated in Maharashtra in 2011.

In its report, Hindenburg Research cited two former Elara traders who described how its funds are “intentionally designed to conceal their beneficial ownership” and that “it’s obvious” that Adani principals own the $3 billion of stock held by the India Opportunities Fund. “I think this is definitely held by the Adani Group…Because no one else would want to buy,” one of the traders told Hindenburg.

The Adani Group denied any connection to Elara Capital’s funds in its rebuttal of Hindenburg’s response. “Innuendoes that they are in any manner related parties of the promoters are incorrect,” the group wrote.

Monarch Networth Capital, in addition to allegedly being partly owned by an Adani Group entity, has a history of business dealings with the company, according to Hindenburg: In 2018, Rakesh Shah, Gautam Adani´s brother-in-law, partnered with Monarch in the purchase of an airline. A year later, Monarch underwrote Adani Green Energy’s $110 million bond offering. Hindenburg wrote: “Given the importance of maintaining SEBI compliance, one would have expected the Adani Group to have chosen experienced, credible bookrunners to manage the deal. Instead, Adani Green Energy chose an entity it could likely influence, if not control outright.” Separately, Monarch was convicted in 2011 of participating in a market rigging scheme.

The Adani Group’s response to Hindenburg did not deny partial ownership of Monarch Networth capital, but said it had partnered with Monarch “for their credentials and ability to tap into the retail market.” The Adani Group also dismissed Monarch’s previous legal run-in as a “1 month suspension more than a decade ago” which has “no further relevance.”

Other underwriters of Adani’s $2.5 billion share included SBI Capital Markets, the investment banking subsidiary of the State Bank of India; Jefferies India Private Limited, a subsidiary of the U.S. investment bank Jefferies; and various Indian financial institutions. The Wall Street banks that have brokered the Adani Group’s dollar-denominated debt offerings in recent years did not participate as underwriters.

Story was updated at 12:34pm ET to reflect Adani Enterprises’ cancelling of its share sale.