Key Adani investor Elara co-owner with Adani in defence firm

This defence company, incorporated in 2003, works closely with ISRO and DRDO and has a Rs 590-crore contract with the Union Ministry of Defence in 2020 to upgrade and digitise the ageing Pechora missile and radar systems.

While Adani Defence Systems and Technologies Ltd is a 26 per cent shareholder with management control in ADTPL (see flow chart), financial statements and records obtained from the Registrar of Companies lift the corporate veil around ADTPL’s real owners. These show, through pyramid structuring, how Elara and Adani together own a majority of 51.65 per cent in Bengaluru-based ADTPL.

Elara Capital, which has been in the eye of a storm after US-based Hindenburg Research raised questions about its source of funding — prompting the Supreme Court to set up a panel and ask capital market regulator SEBI to probe the allegations – is a big investor in Adani Group companies.

Responding to a set of questions, a spokesperson of the Adani Group said in a statement, “In 2017, Adani Defence was looking for companies which can provide both defence electronics as well as aero-structures capabilities in India. Alpha Design Technologies had capabilities across both electronics as well as aerostructures.”

“Adani Defence invested in ADTL in 2018… Adani Defence had taken a 26 per cent stake and had invested primary funds to grow the company to the next level. Elara India Opportunities Fund has a minority stake of 0.53%. The largest promoter is Vasaka Promoters & Developers,” the Adani Group said in the statement.

The ownership details of Vasaka Promoters and Developers, as per RoC records, reveal that Elara IOF bought 44.3 per cent in Vasaka for Rs 40 crore, and became the single largest shareholder on November 5, 2018. Elara IOF also bought 0.53 per cent directly in ADTPL for Rs 7.62 crore on December 1, 2018. In effect, Elara IOF holds almost 26 per cent (25.65 per cent) in ADTPL.

An email seeking a response from the Ministry of Defence on Mauritius-based Elara IOF’s shareholding in a defence company did not elicit a response.

At present, over 96 per cent of Elara’s investments in India are through Elara IOF in Adani Group companies. As of December 31, 2022, Elara IOF holds 1.6 per cent in Adani Enterprises, 3.62 per cent in Adani Transmission, and 1.62 per cent in Adani Total.

In the past, it had held stakes in Adani Ports (2.35 per cent until March 2021) and Adani Green (1.67 per cent until September 2021). Elara’s holding in Adani Group companies has been declining in the last three years due to profit booking as share prices jumped.

ADTPL filings show it is owned by Vasaka Promoters and Developers Pvt Ltd, which had 56.7 per cent stake in ADTPL as on March 31, 2022.

In about a month, on December 13, 2018, Adani Defence, pumped in Rs 400 crore to acquire 26 per cent in ADTPL. This valued the company at about Rs 1,538 crore. Thus, Adani and Elara together own 51.65 per cent, i.e., a majority stake in ADTPL.

After Adani Defence acquired 26 per cent in ADTPL, the company passed a resolution categorising the former as one of the promoters along with Vasaka (in which Elara IOF is the single largest shareholder with 44.3 per cent stake), and Col H S Shankar.

Col Shankar has been the CMD of ADTPL since it was incorporated in 2003. He holds 0.019 per cent in the company as on March 31, 2022, and also sits on the board of Vasaka. For the year ended March 31, 2021, ADTPL registered a net profit of Rs 9.7 crore on a turnover of Rs 450 crore.

The unique corporate structure leaves ADTPL as a subsidiary of Vasaka Promoters & Developers (of which Elara IOF is the single largest shareholder), as well as Adani Defence.

The ADTPL Annual Report for 2020-21 says so in as many words: “The Company is a subsidiary company of Vasaka Promoters & Developers Pvt Ltd by virtue of shareholding. The company is a subsidiary of Adani Defence Systems and Technologies Limited by virtue of control over the composition of the Board of Directors.”

Vasaka Promoters and Developers was incorporated in 1995 and in 2006, its four shareholders A Vellayan (Vice Chairman of the Murugappa Group); his brother A Venkatachalam; and two other family members, AR Murugappan and M Subramaniam; each held around 25 per cent.

The shareholding changed over the years and at the end of March 31, 2022, the shareholding was: Elara IOF (44.3 per cent), Amarjit Singh Bakshi-founded Safdarjung Estates (22.38 per cent), Amarjit Singh Bakshi (1.38 per cent), AR Murugappan (7.99 per cent) and M Subramaniam (7.99 per cent), Wellness Charitable Trust (15.97 per cent).

ADTPL shareholding as on March 31, 2022, stood at: Vasaka 56.57 per cent, Adani Defence 26 per cent, Col Shankar: 0.019 per cent, Elara IOF 0.53 per cent, One Earth Capital 10.3 per cent and Alpha Design ESOP Trust 5.8 per cent.

As per the annual report of Adani Enterprises Ltd (AEL), ADTPL, which is involved in manufacturing satellite and ground equipment, electronic warfare and military communications equipment, and aerospace assembly, operationalised a simulator for the IAF’s MiG-29 aircraft in Adampur under a 20-year Build Operate Maintain contract.

The most recent contract, early this year, won by ADTPL was for LWRRs (lightweight radio relays) for the Army. ADTPL is also the first Indian offset partner for Israel Aerospace Industries (IAI) for production of Air Defence Fire Control Radars, 66 of which have been delivered to the Army.

***

Full response of the Adani Group

In 2017, Adani Defence was looking at the Indian defence manufacturing landscape and looking for companies which can provide both defence electronics as well as aero-structures capabilities in India. Adani Defence went through an analysis of Companies such as Data Patterns, Astra Microwave, Apollo Microsystems, Alpha Design Technologies etc.

Alpha Design Technologies Limited came across as one of the defence players which had capabilities across both electronics as well as aerostructures. The Company is a renowned supplier of
defence equipment in the Company and was recognized as a good supplier amongst the Customers also.

Adani Defence had invested in ADTL in 2018 based on Company’s management and the capabilities of the Company. Adani Defence had taken a 26% stake (as an associate Company of Adani Defence) in the Company and had invested primary funds (and not giving an exit to any of the existing Promoters) in the Company to grow the Company to the next level.

Elara India Opportunities Fund has a minority stake of 0.53% in the Company.

The largest Promoters in the Company is Vasaka Promoters which is promoted by the renowned Murugappa Group and is the largest shareholder in the Company.