A seemingly tiny island nation in the Indian Ocean, about 2,000 kilometers from Mumbai's financial district, has subtly established itself as the most influential player in Indian corporate finance.
Mauritius, with its population of just 1.3 million and GDP of $14.2 billion, has emerged as the single largest source of foreign direct investment into India, channeling over $134.5 billion since 2000.
This astonishing figure represents 34% of all FDI flowing into the subcontinent, dwarfing investments from the usual economic powerhouses—the United States, Japan, and the Netherlands combined.
But beneath this remarkable investment story is a labyrinthine network of shell companies, tax optimization schemes, and offshore financial engineering that has transformed Mauritius into what critics call a "conduit for round-tripping" Indian money back into India itself.
The island nation's role as a tax haven has enabled what experts estimate as over 90% of investments attributed to Mauritius being actually rerouted through the country by parties elsewhere.
The Adani Empire and the Mauritius Connection
The most explosive example of this offshore maze emerged in January 2023, when U.S.-based short-seller Hindenburg Research published a devastating report titled "How The World's 3rd Richest Man Is Pulling The Largest Con In Corporate History."
The report alleged that Gautam Adani's $218 billion conglomerate had engaged in "brazen accounting fraud, stock manipulation, and money laundering" through an intricate web of offshore entities, with Mauritius serving as a star actor.
Hindenburg identified 38 shell entities based in Mauritius that were allegedly controlled by Vinod Adani, Gautam's brother, or close associates of the Adani Group.
These entities, the report claimed, were used to artificially inflate Adani stock prices through a sophisticated round-tripping scheme that rerouted Indian money through Mauritius and back into Adani companies as seemingly legitimate foreign investment.
| Step | Entity | Jurisdiction | Action | Notes |
|---|---|---|---|---|
| 1 | Indian entity or individual | India | Sends money to Mauritius | Sometimes via intermediaries in Dubai, Singapore |
| 2 | Shell company (e.g., Gudami International, Krishna Trading) | Mauritius | Receives funds | Shells controlled by associates of Adani |
| 3 | Investment fund (e.g., Elara, APMS Investment Fund) | Mauritius | Invests in Adani listed companies | Buys large stakes on Indian stock market |
| 4 | Listed Adani company (e.g., Adani Enterprises, Adani Power) | India | Receives capital via equity purchase | Creates appearance of FPI interest |
| 5 | Profits (dividends, capital gains) | India → Mauritius → India | Repatriated or recycled | Possibly via layered ownership chains |
The allegations were staggering in their scope. In the five years prior to the Hindenburg report, Adani equities saw unprecedented rallies, with flagship Adani Enterprises Ltd. surging almost 2,600%, about 41 times the gain in the benchmark Nifty 50 index.
The report's publication immediately triggered a market meltdown, wiping $153 billion from Adani Group's market capitalization.
Related Books to Read
American Kleptocracy
By Casey Michel
Offers an explosive investigation into how the United States built the largest illicit offshore finance system globally, revealing how Delaware and Nevada perfected anonymous shell companies that facilitate the same round-tripping schemes seen in the Mauritius route.
Buy on AmazonTreasure Islands
By Nicholas Shaxson
Provides the definitive analysis of how offshore tax evasion costs the U.S. $100 billion annually in lost revenue, while documenting how over half of world trade is routed through tax havens in schemes that make the Mauritius maze appear almost quaint by comparison.
Buy on AmazonThe Evolution of Mauritius as a Tax Haven
The story of Mauritius's transformation into India's primary offshore gateway begins in the 1980s, when the island nation negotiated a Double Taxation Avoidance Agreement (DTAA) with India.
This treaty, designed to prevent companies from being taxed twice on the same income, inadvertently created a massive loophole that allowed investors to avoid Indian capital gains taxes entirely.
The mechanics are elegantly simple yet devastatingly effective. While Mauritius maintains a corporate tax rate of 15%, the effective tax rate is only 3%, with no withholding tax and no capital gains tax on dividends.
A hypothetical British company investing in India could establish a subsidiary in Mauritius, route its investments through this entity, and dramatically reduce its tax obligations while maintaining the appearance of legitimate foreign investment.
Between 2001 and 2011, an astounding 39.6% of all FDI flowing into India originated from Mauritius.
This figure becomes even more remarkable when considering that nine of the ten largest foreign business organizations investing in India from April 2000 to January 2011 were based in Mauritius, including TMI Mauritius Ltd. ($1.6 billion), Oracle Global (Mauritius) Ltd. ($1.08 billion), and Vodafone Mauritius Ltd. ($801 million).
The Sequoia Capital Revelation
The reach of the Mauritius route extends far beyond traditional corporations into the heart of India's startup ecosystem. In 2019, the International Consortium of Investigative Journalists revealed that Sequoia Capital, one of India's most active venture capital investors, had been reducing its tax burden by setting up shell companies in Mauritius.
The so-called "Mauritius Files," based on 200,000 internal documents from Mauritian law firm Conyers Dill & Pearman, exposed how major venture capital funds exploited the island nation's "attractive tax regime to bring funds in from offshore accounts.
The investigation revealed that the primary modus operandi involved creating shell companies to anchor investments outside India, allowing massive funds and corporations to avoid paying full tax liability.
India's Corporate Titans and Offshore Strategies
The Mauritius route isn't limited to the Adani Group. India's largest conglomerates have long utilized offshore structures for legitimate business purposes and, critics argue, aggressive tax optimization.
Reliance Industries, India's largest private sector company with revenues of $113.99 billion, maintains extensive offshore operations.
The company has successfully completed India's first offshore facilities decommissioning project through joint ventures with Shell and ONGC, demonstrating the legitimate operational aspects of offshore business structures.
Similarly, Tata Motors secured $425 million through unsecured offshore bonds at a competitive 4.35% interest rate, a strategic move to refinance existing obligations and fund corporate needs.
As part of the Tata Group—India’s most valued conglomerate with a 2010 market capitalization nearing $44.52 billion—the company operates across international markets that depend on complex offshore financial structures to manage scale, liquidity, and cross-border growth.
The Regulatory Response and International Pressure
The global financial community's tolerance for aggressive tax optimization schemes has steadily eroded since the 2008 financial crisis. Mauritius came under particular scrutiny after the Paradise Papers leak in 2017, which alleged the country was a secretive financial hub allowing businesses and wealthy individuals to shield assets and profits from taxation.
In response to mounting international pressure, India and Mauritius reworked their tax treaty in 2016, closing a popular loophole that allowed India to tax short-term capital gains, though zero levies remain on investments held for over a year.
The UAE, subsequently amended its tax treaty with India, forcing companies that had been using the Mauritius platform to seek alternative structures.
The Mauritian government has vigorously defended its financial services sector. Following the Hindenburg allegations against SEBI chief Madhabi Puri Buch, the Financial Services Commission of Mauritius stated that "the allegations of the presence of shell companies in Mauritius are false and baseless," noting that "shell companies are not allowed in Mauritius."
The Hidden Costs of Financial Engineering
Sophisticated offshore structures enabled through jurisdictions such as Mauritius carry costs that reach beyond forgone revenue. For every dollar in aid directed toward developing countries, as much as ten dollars exit through reverse flow, draining capital through offshore circuits at a scale that destabilizes entire regions.
This quiet extraction of wealth has social consequences that rarely make headlines but shape outcomes in public health, infrastructure, and education.
Research by Professor Jason Sharman highlights a deeper irony. While offshore centers often appear more compliant than their onshore counterparts, the broader architecture designed to prevent illicit finance remains porous.
Development efforts unravel, not through mismanagement, but through a system built to redirect gains where they are least taxed and least scrutinized.
The SEBI Scandal
The Adani affair took a dramatic turn in August 2024 when Hindenburg published a follow-up report titled "Whistleblower Documents Reveal SEBI's Chairperson Had Stake In Obscure Offshore Entities Used In Adani Money Siphoning Scandal."
The report alleged that Madhabi Puri Buch, head of India's securities regulator, and her husband had invested in the same offshore funds allegedly used by Vinod Adani for round-tripping schemes.
The Financial Services Commission of Mauritius responded by clarifying that the funds mentioned in the Hindenburg report—IPE Plus Fund and IPE Plus Fund 1—"are not licensees of the FSC and are not domiciled in Mauritius."
This revelation highlighted the complex web of jurisdictions involved in modern offshore finance, where ultimate beneficial ownership can be obscured across multiple legal systems.
Shadow Banking Networks
The Mauritius-India financial corridor has developed into a high-precision instrument of regulatory arbitrage, where phantom capital flows pass through seemingly legitimate channels to distort valuation, foreign investment metrics, and oversight mechanisms.
In the Adani case, shadow banking networks operated through 38 Mauritius-based entities that allegedly moved vast sums into Indian equities while concealing beneficial ownership behind opaque, layered structures.
This model amplified concentration risk, with a single jurisdiction accounting for over a third of India’s FDI, placing the capital markets at the mercy of external shifts and internal fragilities. At its core, this system has blurred the line between investor and regulator, with oversight compromised through structural entanglement and institutional capture.
Likely over $67 billion in round-tripped capital has entered Indian markets under the guise of foreign interest, warping currency flows, sector allocations, and investor confidence. The speed and scale of these operations reflect a global trend in which financial power consolidates offshore, decoupling asset growth from productive fundamentals.
Coordinated reform is overdue—built on mandatory disclosures, near-real-time capital movement monitoring, and a shared global framework to define what qualifies as legitimate investment. Mauritius is not the exception—it is the model.