Adani Group Faces Fresh Allegations Over Mislabeling $360M Of Coal In Deals With State

Zinger Key Points
  • New evidence accuses Adani of selling low-quality coal as higher-grade fuel to Tangedco, inflating prices.
  • The accusations of misrepresented coal quality follow previous claims of stock manipulation and fraud by Hindenburg Research.

New allegations have surfaced against Adani Group, accusing the conglomerate of passing off low-quality coal as higher-grade fuel.

What Happened: According to the Financial Times, the fraud involved misrepresenting the calorific value of coal imported from Indonesia. For instance, invoices show that in January 2014, Adani purchased a shipment of coal with a calorific value of 3,500 calories per kilogram.

This coal was sold to an Indian state power utility as higher grade 6,000-calorie coal at a significantly inflated price.

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Why It Matters: The Financial Times and Organized Crime and Corruption Reporting Project (OCCRP) have matched documentation for an additional 22 shipments in 2014, revealing a consistent pattern of grade inflation for approximately 1.5 million tons of coal, totaling a discrepancy of around $70 million.

Benzinga has contacted Adani Group for comment on the Financial Times report.

Jayaram Venkatesan, convener of the NGO Arappor Iyakkam, highlighted the financial impact of this practice. He estimated the utility (Tamil Nadu Generation and Distribution Corporation) to have suffered losses between 2012 and 2016 at $720 million — half of it coming from Adani.

Burning low-quality coal also raises significant environmental concerns. Coal with a lower calorific value necessitates a larger volume to generate the same amount of electricity, leading to increased air pollution.

India’s Directorate of Revenue Intelligence initiated an investigation into potential coal price inflation in 2016. However, legal proceedings have impeded progress. The new evidence unearthed by OCCRP could reignite the investigation and prompt renewed scrutiny of the Adani Group’s influence within India’s political and economic spheres.

Despite the damaging allegations, Adani Group’s stock has shown resilience. Following Hindenburg's report, the conglomerate's shares suffered a severe drop but have since almost fully recovered.

“This episode also gave us confidence in our own resilience. Our recovery highlights the essence of bouncing back stronger, symbolizing the spirit of rising after every fall,” chairman Gautam Adani said at an event in Mumbai earlier this year, referring to the stock crash from early 2023.

Last year, Hindenburg Research claimed the firm engaged in stock manipulation and an accounting fraud scheme, costing the company tens of billions of dollars.

This recovery has persisted despite further adverse events, including the recent decision by Norway’s Government Pension Fund to divest from Adani Ports, per Bloomberg's report.

Adani Group’s spokespersons have consistently denied all allegations, asserting that the quality of coal supplied is independently tested at multiple points, including by customs authorities and scientists with Tamil Nadu Generation and Distribution Corporation.

The group maintains that the accusations are baseless and unfounded.

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