NSDL blocks the accounts of three foreign portfolio investors (FPIs) that own Adani Group shares worth Rs 43,500 crore.

The National Securities Depository Ltd (NSDL) has frozen the accounts of three Foreign Portfolio Investors (FPIs) — Albula Investment Fund, Cresta Fund, and APMS Investment Fund — that collectively own more than 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 freeze is unknown at this time, a report in the Economic Times citing senior officials at custodian banks and law firms that deal with foreign investors suggested that it could be due to insufficient disclosure of beneficial ownership information in accordance with the Prevention of Money Laundering Act (PMLA).

“The freezing could be the result of insufficient beneficial ownership documentation,” a senior official at a custodian told the paper. “Custodians normally notify clients prior to taking such action, but if the fund fails to react or complies, accounts may be frozen.”

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

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

According to business daily, all three entities are registered in Port Louis at the same address and do not have websites. Collectively, these funds own 6.82 percent of Adani Enterprises, 8.03 percent of Adani Transmission, 5.92 percent of Adani Total Gas, and 3.58 percent of Adani Green. The Adani Group owns six publicly traded enterprises. Adani Ports and Adani Power are the other two.

It’s worth noting here that Sebi revised the know your customer (KYC) documents for FPIs in 2019 to ensure compliance with the PMLA. Funds have been given until 2020 to conform to the new standards, after which their demat accounts will be frozen. FPIs were required to submit a few additional facts under the new guidelines, including disclosures about common ownership and the personal information of key fund staff, such as fund managers.

Additionally, Sebi is apparently investigating if price manipulation occurred in Adani Group shares, which have increased by between 200 and 1000 percent in the last year.

“Sebi launched an inquiry in 2020 and it is still underway,” a person acquainted with the case told the business daily. Sebi did not react to ET’s inquiry.

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

74.92 percent of Adani Transmission, 74.92 percent of Adani Enterprises, 74.80 percent of Adani Total Gas, and 56.29 percent of Adani Green are owned by the promoter group. The group’s relatively low free float has been the subject of debate and attention in market circles.

The Adani Group’s entire market value was Rs 9.5 lakh crore on Friday, making chairman Gautam Adani Asia’s second richest man.

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Krishna Rath is a SEBI Registered Investment Adviser, and since 2015 has been educating netizens on investments and insurance. Krishna is a fee only SEBI RIA and is Odisha's first SEBI RIA. With background in IT, Krishna is changing the advisory space with new innovations in AdvisoryTech.

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