New Regulatory Scrutiny on Adani Group
Just when the Adani Group seemed to have weathered the bulk of its regulatory storms, a new cloud has emerged over its defense arm. Indian authorities are now investigating Adani Defence Systems and Technologies for allegedly evading customs duties on imported missile components.
The Directorate of Revenue Intelligence (DRI) started its probe in March 2025. The core allegation? That the Adani Enterprises subsidiary misclassified short-range missile parts as components for long-range missiles to claim an exemption from tariffs. According to government sources, the alleged tax evasion stands at approximately ₹77 crore (around $9 million).
Misclassification of Missile Components
This isn’t just about a clerical error. The imported components in question were non-explosive parts for short-range surface-to-air missile systems. Under the rules in effect at the time of import, these parts attracted a significant duty structure: a 10% import tax plus an 18% local tax.
However, by allegedly misclassifying them as long-range missile components—which were exempt from tariffs—Adani Defence reportedly avoided paying the dues. For context, the alleged $9 million evasion is substantial, representing more than 10% of Adani Defence’s FY25 revenue of $76 million. Government sources suggest that Adani executives admitted to the misclassification during the inquiry, though the company has not publicly confirmed this. In typical customs cases, a penalty of 100% of the duty evaded could be levied, potentially bringing the total liability to **$18 million**.
Self-Reliance vs. Compliance
This probe lands squarely on a sensitive sector for India: defence and self-reliance (Aatmanirbhar Bharat). The Adani Group has positioned itself as a key private partner in indigenous defence manufacturing, supplying equipment like drones, small arms, and missile systems to Indian security forces. The company has imported over $70 million worth of defence parts from countries like Russia and Israel since January 2024.
The controversy highlights the complex customs and tax environment surrounding the defence industry’s transition from a Public Sector Undertaking (PSU) dominated landscape to one featuring large private players. Adani Group, while denying wrongdoing, issued a statement saying the DRI had “sought clarifications” based on their interpretation of the rules and that the “clarifications have been provided with supporting documents.” An Adani spokesperson added, “The issue stands closed from our end,” though it remains unclear if any settlement was made.
Persistent Scrutiny …
This investigation marks the newest regulatory scrutiny for the conglomerate. While India’s market regulator SEBI recently cleared the group of some allegations of stock manipulation, it still faces several other inquiries. For Adani Defence, which aims to be a cornerstone of India’s private military-industrial complex, continuous regulatory oversight will be a key factor in its market perception and long-term valuation. The ability of the group to manage such compliance issues efficiently is crucial for maintaining investor and government confidence as it expands its footprint globally and domestically.
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