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Adani Ports Said to Be Probed by India on Money Laundering

Billionaire Gautam Adani
Billionaire Gautam Adani’s port unit has failed to win security clearances needed to expand operations because it is being investigated by the Indian government for possible money laundering, according to three people familiar with the matter. Photographer: Abhijit Bhatlekar/Bloomberg

Billionaire Gautam Adani’s port unit has failed to win security clearances needed to expand operations because it is being investigated by the Indian government for possible money laundering, according to three people familiar with the matter. The stock slumped.

The Ministry of Home Affairs has for more than a year been probing Adani Ports & Special Economic Zone Ltd. and the source of money transferred to the company from Mauritius, said two government officials. All three people declined to be identified as they aren’t authorized to release the information.

The investigation has derailed or disrupted the Ahmedabad, India-based company’s bids to operate at least three port projects, the people said. That has hindered the Adani Group’s push to boost port capacity about fourfold by 2020 as it imports coal from Australia and Indonesia for its power stations.

Adani Ports “categorically deny all allegations of money laundering,” the Adani Group said in an e-mailed statement. “The company also wishes to state that it has not received any intimation from the Indian government nor is it under any kind of government investigation.”

The company last month won government approval to develop a bulk-cargo terminal in Kandla on the west coast, it said. It has also begun building an import terminal in the eastern port of Visakhapatnam. Adani Ports also operates Mundra Port in western Gujarat state, the nation’s busiest non-government run harbor.

Ira Joshi, a spokeswoman at the Ministry of Home Affairs, didn’t reply to e-mailed questions about the probe. The Ministry of Home Affairs is responsible for India’s internal security.

The port operator fell 7.1 percent to 135 rupees at close of trading in Mumbai, after slumping as much as 11 percent. Parent Adani Enterprises Ltd. fell 0.5 percent.

Vizhinjam Port

The projects that Adani Ports has been unable to win security approval for include a multipurpose facility in Vizhinjam in the southern state of Kerala, the people said. The company was also shut out of the bidding for a bulk-cargo export terminal in Visakhapatnam in Andhra Pradesh last year, they said.

Adani Ports is 77 percent owned by Adani Enterprises, Gautam Adani’s main holding company and India’s biggest coal importer. The group, founded in 1988, also has investments in mining and edible oils in countries including India, Australia and Indonesia. The 49-year-old Gautam Adani, who owns 57 percent of Adani Enterprises, has a $5.4 billion fortune, according to Forbes.

Gujarat State

The billionaire’s business is based in Gujarat state, which is run by the Bharatiya Janata Party. On the federal level, the BJP is the main opposition to the ruling Indian National Congress-led coalition government.

The country’s Enforcement Directorate imposed a penalty on Rajesh Adani, managing director of Adani Enterprises and Gautam’s brother, for violating the Foreign Exchange Regulation Act and the Customs Act, according to the 2007 prospectus for the port unit’s initial public offering. The penalty was set aside on appeal and the matter was returned to the Directorate, it said.

It is common for Indian companies to receive funds from Mauritius. The island nation was the single largest source of foreign direct investments into India in the year ended March 31. Overseas investors often buy shares in India through subsidiaries in Mauritius to take advantage of a tax agreement between the two countries. Indian companies have also invested more than $200 million in Mauritius in the last five years, according to India’s Ministry of External Affairs.

Adani Ports’ contract to operate the Kandla bulk-cargo terminal may eventually be derailed by the investigation, said one of the government officials. The company failed to win a Chennai container-terminal deal last year after placing the only bid. Chennai Port Trust Chairman Atulya Misra said Dec. 31 that the offer was rejected because it was too low.

The company won security clearance for the Kandla project before a 2010 change in how India classifies money laundering, the two government officials said. The country upgraded the issue to a security concern from an economic crime that year.

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