THE ADANI GROUP underpins swathes of India’s economy. The family-controlled conglomerate’s businesses include airports, energy and natural resources, among other critical infrastructure. Its founder, Gautam Adani, is the world’s 14th richest man, worth some $72bn, according to Bloomberg. In terms of perceived ability to navigate India’s treacherous legal landscape and impenetrable red tape, he is in the same league as a fellow (slightly wealthier) billionaire, Mukesh Ambani.

So when the share prices of the Adani Group’s six listed entities plunged on June 14th, heads spun. That day the Economic Times, an Indian newspaper, reported that the National Securities Depository, which clears stockmarket trades, had frozen the shares held by three funds based in Mauritius owing to insufficient information about their underlying investors. All three funds were registered at the same address and appear to have a combined $6bn or so in Adani Group assets. The news that a substantial chunk of the free float in Adani Group companies could no longer be traded triggered wild trading in the portion that still could be. Share prices of the companies fell by between 5% and 25%.

The Adani Group immediately issued a statement calling the story “blatantly erroneous”. It was vindicated after the clearing house cleared up that the funds were not in fact frozen. The affected shares largely recouped their losses. Securities firms rushed to put out reports underscoring that the odd movements in share prices did not reflect a change in the group’s prospects, which appear bright. Mr Adani’s companies have recently won big contracts to run airports and exploit energy fields. The group counts giants like Total, a French oil supermajor, and Qatar’s sovereign-wealth fund as junior partners in various joint ventures. The combined market value of the Adani Group’s six listed subsidiaries has more than quadrupled in the past year, to $115bn (see chart), propelling Mr Adani past Chinese moguls into second spot on Asia’s rich list, behind only Mr Ambani.

That was not the end of the confusion, however. In a regulatory filing on June 15th the Adani Group noted that some trading in the three Mauritian funds had in fact been suspended because of an order issued several years ago. It gave no details of the suspension. That in turn set tongues in India’s gossipy business world wagging. Some wondered if this is a sign of a regulatory crackdown on plutocrats of the sort now under way in China. Others recalled a report published in April by the Morning Context, a business-news site, about the three Mauritian funds’ high exposure to the Adani Group.

The episode also brought renewed attention to a quirk of Indian corporate ownership—and its uncertain future. To cope with India’s extensive, bewildering and intrusive tax regime, foreign investors have for years invested in the country through Mauritius, which has a tax treaty with India. That pact has been amended over time. In February 2020 a new change enabled the Indian authorities, concerned that Indian citizens were using the island to evade Indian taxes, to gain access to Mauritius-registered funds’ lists of investors. This time the story of a trading freeze may have been bunk. Another time, for some company or another, it might not be. ■

This article appeared in the Business section of the print edition under the headline “Short circuit”