Shocker to Adani as NSDL Freezes 3 FPIs Owning Shares

New Delhi: The accounts of three Foreign Portfolio Investors (FPIs) — Albula Investment Fund, Cresta Fund, and APMS Investment Fund — have been frozen by the National Securities Depository Ltd (NSDL), which together owns over Rs 43,500 crore worth of shares in four Adani Group companies: Adani Enterprises, Adani Green Energy, Adani Transmission, and Adani Total Gas. These accounts were frozen on or before May 31, according to the depository's website.

Although the reason for the freezing is unknown, top executives at custodian banks and law firms dealing with overseas investors told a leading news agency that it might be due to a lack of disclosure of information on beneficial ownership as required by the Prevention of Money Laundering Act (PMLA).

The report noted a senior official with a custodian as stating, "The freeze could be because of inadequate beneficial ownership documentation."

"Custodians typically warn their clients before such action, but if the fund doesn’t respond or fails to comply, accounts can be frozen."

An account freeze prevents the funds from selling any current securities or purchasing any new ones.

The three funds were established in Mauritius and are registered as foreign portfolio investors (FPIs) with the Sebi.

According to the report, all three firms are registered in Port Louis at the same location and do not have websites. These funds together own 6.82% of Adani Enterprises, 8.03% of Adani Transmission, 5.92% of Adani Total Gas, and 3.58 percent of Adani Green. There are six firms in the Adani Group that are publicly traded. Adani Ports and Adani Power are the other two.

It's worth noting that in 2019, Sebi overhauled the know your customer (KYC) paperwork for FPIs in accordance with PMLA. Funds have until 2020 to comply with the new rules, after which their Demat accounts will be frozen if they do not. FPIs were obliged to disclose a few more facts under the new guidelines, including disclosures of common ownership and personal information for key fund personnel, such as fund managers.

Sebi is also apparently looking into whether there was price manipulation in Adani Group equities, which have risen between 200 and 1000 percent in the last year.

"Sebi initiated a probe in 2020 and the investigation is still ongoing," a source said in a statement.

Adani Transmission shares have risen 669 percent in the last year, while Adani Total Gas shares have risen 349 percent, Adani Enterprises shares have risen 972 percent, and Adani Green has risen 254 percent. During this time, Adani Ports and Adani Power have grown by 147 percent and 295 percent, respectively.

On Friday, the Adani Group's entire market capitalization was Rs 9.5 lakh crore, making chairman Gautam Adani Asia's second-richest man.

Adani Transmission, 74.92 percent of Adani Enterprises, 74.80 percent of Adani Total Gas, and 56.29 percent of Adani Green are all owned by the promoter group. The comparatively low free float of group equities has sparked debate and speculation in the market.