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ED probes Adani Ports on possible money laundering

Investigation has derailed company?s bids to operate at least 3 port projects

Bloomberg  |  New Delhi 

Billionaire Gautam Adani’s port unit has failed to win security clearances needed to expand operations because it is being investigated by the 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 (ADSEZ) 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 authorised to release the information.

The investigation has derailed the Ahmedabad-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.

The Adani Group didn’t comment on the investigation after repeated phone calls and e-mails. It said in a statement it won government approval last month to develop a bulk-cargo terminal at Kandla on the west coast, and had begun building an import terminal in the eastern port of Visakhapatnam.

“We are thankful to the government of India for having reposed faith in us and awarded two key port development projects,” the group said. Adani Ports also operates Mundra Port (ADSEZ) in Gujarat, the nation’s busiest non-government-run harbour.

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 Adani Ports stock slumped 11 per cent in Mumbai trading. It was down 6.4 per cent at Rs 135.95 as of 2.41 pm. Parent Adani Enterprises Ltd. (ADE) fell five per cent.

Gujarat state
The 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 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. Foreign investors often buy shares in India through subsidiaries in Mauritius to take advantage of a tax agreement between the two countries. Indian have also invested more than $200 million in Mauritius in the last five years, according to 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 won security clearance for the Kandla project before a 2010 change in the classification of money laundering, the two government officials said. The country upgraded the issue to a security concern from an economic crime that year.

First Published: Sat, March 10 2012. 00:35 IST
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