The Securities and Exchange Board of India (SEBI) has issued a strong warning to two Mauritius-based offshore funds that hold large stakes in Adani Group companies. These funds—Mausam Investment Fund and APMS Investment Fund—are believed to have significant investments in listed entities like Adani Enterprises, Adani Ports, Adani Green Energy, and Adani Power. According to SEBI, these offshore funds failed to provide proper disclosure regarding their ultimate beneficial ownership, a serious violation of Indian market regulations. SEBI has now threatened to impose penalties, initiate legal action, or even ban the funds from participating in Indian markets if they fail to comply.
This development is critical because it highlights SEBI’s determination to bring greater transparency to foreign investment in India. Over the past few years, concerns have grown about offshore investors using complex corporate structures to control large portions of Indian companies without revealing the real owners. This lack of transparency can lead to market manipulation, insider trading, and even money laundering. By targeting these two funds, SEBI is making it clear that such behavior will not be tolerated.
The background to this issue lies in the explosive Hindenburg Research report published in January 2023. The U.S.-based financial research firm accused the Adani Group of engaging in stock manipulation and using a network of shell companies in tax havens such as Mauritius to artificially inflate the prices of its stocks. While the Adani Group strongly denied the allegations, the report caused a sharp fall in the group’s stock prices and triggered investigations. The Supreme Court of India ordered SEBI to conduct a detailed probe into the matter, especially focusing on offshore investment patterns related to Adani stocks.
SEBI’s central complaint against the two Mauritius-based funds is that they have not disclosed who their true owners are. According to Indian law, any investor holding more than a specified percentage in a listed Indian company must declare the ultimate beneficial owner (UBO). This rule is meant to prevent cases where promoters secretly invest in their own companies using front organizations or shell companies. The two offshore funds, however, have only provided vague responses or cited legal restrictions under Mauritius laws, which SEBI finds unacceptable.
SEBI has stated that if these funds fail to provide the required information within the final deadline, it will take strict actions under the SEBI Act, 1992. These actions may include imposing monetary penalties up to ₹1 crore or more, freezing of trading accounts, cancellation of licenses, and even banning these funds from operating in the Indian stock market. Legal proceedings could also be initiated if any criminal activity, such as fraud or money laundering, is found.
While the Adani Group itself has not been directly accused in this latest warning, the fact that these offshore funds are heavily invested in Adani companies puts the group in the spotlight again. A spokesperson for Adani Group issued a statement welcoming regulatory scrutiny and said the group is fully compliant with Indian laws. They added that the group has no control or influence over independent foreign investors. Despite this, the controversy impacts investor sentiment, and Adani stock prices saw a minor drop in trading after SEBI’s notice became public.
The market reaction to SEBI’s action has been mixed. While some investors are cautious about the possible impact on Adani shares, others see this as a positive step that promotes market integrity and strengthens investor trust. Analysts have noted that regulatory efforts to improve disclosure norms and crack down on non-transparent practices will ultimately benefit the Indian stock market.
One of the reasons why funds registered in Mauritius are often under scrutiny is due to the island nation’s reputation as a tax haven. Many Foreign Portfolio Investors (FPIs) use Mauritius as a gateway to invest in Indian markets because of favorable tax treaties. However, several of these entities operate as shell companies—firms that exist only on paper and are used to hide the true source of funds. This has raised red flags for SEBI and led to tighter scrutiny of foreign investments.
The latest warning also ties back to a broader investigation that SEBI is conducting under the guidance of the Supreme Court of India. The Court had earlier granted SEBI an extension to complete its probe into Adani-related foreign investments and ordered the market regulator to submit its findings by August 2024. SEBI has stated that the process is complex because it involves tracking down international ownership structures and may require cross-border cooperation.
For retail investors and small traders, this issue might seem distant, but it is very relevant. When offshore funds are forced to be more transparent, it increases confidence in the Indian markets. It also reduces the risk of manipulation and protects genuine investors from unfair trading practices. At the same time, some experts have warned that overly strict rules may scare away honest foreign investors, so SEBI must strike a balance between regulation and openness.
If SEBI decides to penalize these offshore funds, the consequences could be far-reaching. Other foreign funds may be forced to re-evaluate their own ownership disclosures and compliance levels. There could also be increased attention on the use of tax havens, and regulators in other countries may take note. Ultimately, this move could help reduce the use of shell companies, discourage black money inflows, and improve the overall credibility of Indian financial markets.
SEBI’s warning to these two offshore funds is not just a one-off action. It represents a larger shift in regulatory policy aimed at cleaning up the investment ecosystem. By insisting on full disclosure of ultimate beneficial ownership, SEBI is taking a strong stand in favor of transparency, fairness, and investor protection. Whether the funds cooperate or choose to resist, the outcome will shape the future of foreign investment in India and reinforce the role of SEBI as a powerful market watchdog.
