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The Telegraph
The Telegraph
11 Feb 2023


Prime Minister Narendra Modi and Indian tycoon Gautam Adani have sparked widespread protests in India
Prime Minister Narendra Modi and Indian tycoon Gautam Adani have sparked widespread protests in India Credit: DIBYANGSHU SARKAR/AFP via Getty Images

After sweeping to victory in the 2014 general election, Indian prime minister Narendra Modi hopped on a private jet from his home state of Gujarat to the capital New Delhi.

Plastered on the side of the aircraft was the name of an industrial tycoon and a personal friend of the new premier: Adani.

The son of a small textile merchant, Gautam Adani is a key ally of Modi and his Right-wing Bharatiya Janata party.

His rise mirrored that of the prime minister’s. Both men hail from the western state of Gujarat, where they built their respective business and political power bases before propelling on to the national stage. 

Since Modi took office nine years ago, Adani’s fortune has ballooned as his sprawling empire won state contracts to build infrastructure projects across the country, making him one of the world’s richest men with a net worth of $134bn (£110bn) at the end of last year.

But now, the Adani Group is in crisis after a US-short seller accused it of stock price manipulation and accounting fraud late last month.

While Adani has strongly denied the allegations and issued a 400-page rebuttal, the claims raise questions about the meteoric rise of one of India’s standout success stories and poses a major test for Indian capitalism and its reputation among international investors.

The Adani Group is an Indian industrial conglomerate that spans ports, airports, power, coal and renewable energy infrastructure.

The company was founded by its eponymous chairman in the late 1980s as a commodity trading business and quickly expanded into port infrastructure to boost its trading operations.

In recent years, the company has grown into an empire of strategic importance that affects the lives of millions of Indians on a daily basis. Among other things, Adani stores a third of the country’s grain, produces a fifth of its cement and is one of India’s biggest private airport operators.

Prime Minister Modi boarded Adani’s private jet after his 2014 election victory
Prime Minister Modi boarded Adani’s private jet after his 2014 election victory Credit: Press Trust of India

However, Adani now finds itself fighting for survival. New York-based short seller Hindenburg Research has accused the company of pulling the “largest con in corporate history” by using offshore tax havens to enact fraud and manipulate stock markets. 

The report, which followed a two-year investigation by Hindenburg, claimed that Adani engaged in “brazen stock manipulation and accounting fraud” over decades.

Adani Group hit back, saying the allegations were “not merely an unwarranted attack on any specific company but a calculated attack on India, the independence, integrity and quality of Indian institutions, and the growth story and ambition of India”. It added that the claims were a “malicious combination of selective misinformation and stale, baseless and discredited allegations”.

Yet the impact on the Indian conglomerate was as swift as it was brutal. The company’s share price has halved since Hindenburg published its report two weeks ago, wiping around $100bn off its market value and $60bn off its chairman’s net worth.

Just days after the report was released, Adani was also forced to abandon a $2.4bn share sale as international investors steered clear of a company mired in chaos.

The fundraising was seen as a critical juncture for Adani, not only because it would have helped the company to slash its debts but also because it was regarded as a gauge of confidence in the industrial empire.

In the latest blow, Moody's downgraded the outlook of four Adani companies to negative from stable on Friday.

The ratings agency said: "These rating actions follow the significant and rapid decline in the market equity values of the Adani Group companies following the recent release of a report from a short-seller highlighting governance concerns in the group.”

While the crisis for Adani endures, the bigger issue at stake is India’s global reputation in terms of the integrity of its corporate governance rules and ability to attract international investment.

Modi’s attempt to accelerate its privatisation drive has drawn the ire of opposition politicians who accuse the premier of concentrating state assets in the hands of a few tycoons. Adani’s recent issues will only add fuel to the fire.

In 2017, a leaked government audit said Adani Power, a unit of the conglomerate, received “preferential treatment” from the state in the prices it was allowed to charge. The company denied the allegation.

Last week, Jairam Ramesh, general secretary of the opposition Congress party, asked: “What action has been taken, if ever, to investigate the serious allegations made over the years against the Adani Group?”

And in a jibe at Modi, he added: “Is there any hope of a fair and impartial investigation under you?”

An activist of India's Congress party carries an effigy of Prime Minister Narendra Modi and Indian tycoon Gautam Adani during a rally organised to protest against the union governments financial policies in Kolkata
Protesters against India's financial policies have made effigies of Adani and Modi Credit: DIBYANGSHU SARKAR/Getty Images

International investors will be watching with interest. Gary Dugan, head of Global CIO Office, an asset manager, told Bloomberg that the Adani affair will potentially trigger a “major reassessment” of the risks in investing in Indian-listed stocks.

He said: “That reassessment includes governance, corporate transparency, nepotism and indebtedness.”

Closer to home, Jupiter was the only British money manager to participate in the ultimately abandoned Adani share sale. The only collateral damage in the UK appears to be Jo Johnson, the former universities minister and brother of Boris, who quit his role advising a company with alleged ties to Adani that was named in the Hindenburg report.

But Adani’s rags to riches story is not going to end without a fight. Just hours after the company binned the crucial share sale, the 60-year-old went on television dressed in traditional attire and struck a defiant tone.

He said his empire’s finances were sound and the current crisis would not affect its operations or upcoming plans. He ended his speech with a splash of nationalistic fervour. “Jai Hind,” he said, or “Victory to India”.

He and Modi might need more than love of country to save the embattled conglomerate and India’s reputation on the global stage.