Gautam Adani started this year as Asia’s richest man. Now its shares are in a nosedive after an investment research firm accused the Indian businessman of “pulling the biggest scam in the company’s history.” Hindenburg Research claims that the Adani Group engaged in accounting fraud and money laundering “with the help of government trailblazers” and overvalued key companies by at least 85%.
In a matter of weeks, Mr Adani’s companies have lost over $100 billion in value as the scandal raises questions about India’s economic growth model – including whether Mr Adani should ever be allowed to amass so much wealth.
Why we wrote this
Billionaire Gautam Adani became a symbol of wealth and economic opportunity in modern India. As its fortunes come under scrutiny, so too does India’s economic model and the country’s relationship with its super-rich.
While India’s public market has always been dominated by family-run conglomerates and the country is no stranger to nepotism, experts say the Adani Group’s acquisition of public assets was astounding. In fact, the billionaire’s success over the past decade is directly linked to the government’s mass privatization drive. It has also made the country more vulnerable as the government tries to attract foreign investment.
“If an Indian rises among us through sheer hard work, then there’s nothing wrong with celebrating that,” says financial analyst Raj Pandey, “but if he’s made it through manipulation, then we shouldn’t do it.” [be supporting that].”
Indian businessman Gautam Adani started 2023 as Asia’s richest man, but that all changed on January 24, when a New York-based investment research firm accused the Adani group of “committing the largest fraud in the company’s history.” have. Hindenburg Research alleges that the conglomerate engaged in stock manipulation, accounting fraud and money laundering “with the help of enablers in government.” The bombshell report said seven of its top companies were heavily indebted and at least 85% overvalued.
Adani shares plunge as Securities and Exchange Board of India investigates allegations In just one month, Mr. Adani’s businesses have lost over $100 billion in value and his personal wealth has reportedly halved.
The scandal raises questions about India’s political economy and its growth model – including whether Mr Adani should ever be allowed to amass so much wealth. The billionaire’s success is directly linked to the government’s mass privatization campaign, with Adani companies winning tenders and acquiring many public assets from airports to energy companies. While other billionaires suffered over the past year, his wealth rose by $44 billion, a jump largely attributed to the Adani Group’s growing tally of large infrastructure projects in India. The tycoon’s personal wealth and the government’s pro-business agenda are so closely intertwined that critics are wondering: is Mr Adani a shining Indian success story or the country’s most high-profile sidekick?
Why we wrote this
Billionaire Gautam Adani became a symbol of wealth and economic opportunity in modern India. As its fortunes come under scrutiny, so too does India’s economic model and the country’s relationship with its super-rich.
Adani’s supporters are quick to dismiss the report, but the timing couldn’t be worse for the government. India has recently overtaken the UK to become the world’s fifth largest economy and is keen to increase foreign investment. According to experts, the nosedive of the Adani Group will affect not only the stock market but also clean energy investments in the country.
“If in a huge country like India, a quarter of airport traffic, a third of port cargo and a third of grain storage are under a group’s infrastructure, it indicates a high level of dependency on that group,” says Suyash Rai. Fellow and Associate Director at Carnegie India, a New Delhi-based think tank. “If the group gets into trouble, it can have an impact on the overall economy.”
Gautam Adani speaks during an inauguration ceremony January 31, 2023 after the Adani Group completed the purchase of the Port of Haifa in Haifa, Israel. Mr. Adani began his foray into infrastructure in 1998 with Mundra Port, now the country’s largest commercial port, and later entered the power generation business.
Adani and Modi rise together
While India’s public market has always been dominated by family-run conglomerates and the country is no stranger to crony capitalism, experts say the scale of Adani Group’s growth and asset acquisitions over the past decade has been astounding.
“Never before in the history of India’s post-independent political economy has there been such an aggravated scale of almost obscene wealth accumulation in such a short period of time,” says Deepanshu Mohan, associate professor and director of the Center for New Economic Studies at OP Jindal Global University in Sonipat. India.
Mr. Adani’s story and his rise as a company are closely linked to that of India in the 21st century – a connection underscored by the Adani Group’s 413-page response to the report, which described the allegations as “a calculated attack on.” … the story of growth and ambition of India” – as well as about Prime Minister Narendra Modi.
Both men hail from the western Indian state of Gujarat and the growth of their respective roles in the national sphere is seen as closely linked. Mr Modi has enjoyed the billionaire’s enthusiastic support since he was Gujarat’s prime minister, and when he won the national election in 2014, he flew to Delhi in Mr Adani’s private jet. In turn, Mr. Adani’s business ventures also appear to be benefiting from the close relationship, as his net worth has grown by more than 1,600% over the past nine years.
Mr. Adani began his infrastructure foray in 1998 with Mundra Port, now the country’s largest commercial port, and a decade later entered the power generation business, eventually becoming the country’s largest privately owned thermal power producer. He has announced ambitions to create 45 gigawatts of renewable energy capacity by 2030, in line with government plans. Its companies have also ventured into defense, data centers and airport operations after the government eased regulations in the sector.
But this kind of market domination, experts say, doesn’t really add to India’s “growth story”.
Prosperity for a nation or a nation’s elite?
In the annual budget, announced a week after the Hindenburg report was published, the government increased investment by a whopping 37%, particularly in infrastructure-intensive sectors. Along with recent corporate tax cuts and stimulus, that reflects the government’s plan to attract private investment, says Mr Mohan, but the strategy has been largely unsuccessful.
A motorist passes Adani Corporate House in Ahmedabad, India on January 27, 2023. Gautam Adani saw his companies lose more than $100 billion after Hindenburg Research accused him of “committing the biggest fraud in the company’s history,” sparking a massive sell-off of Adani shares.
Private investment has actually declined over the past decade and small businesses have suffered. A handful of family-run conglomerates like Mr Adanis’s have benefited from these government moves, he adds, but the group’s investments have largely been focused on buying rather than creating publicly managed assets.
“It’s a point that a lot of people overlook,” says Mr. Mohan. “It’s okay for a big company to keep getting bigger, but [only] When you create assets, it creates new jobs and more opportunities for economic growth. Productivity is not increasing, acquisitions have increased and the Adani Group is using this to overvalue its shares.”
This is particularly glaring when you consider that government welfare spending has not kept pace with rising poverty, hunger and unemployment in the country.
“There is a lot of propaganda about India’s growth story,” says Arun Kumar, emeritus economics professor at Jawaharlal Nehru University.
For a true picture of India’s economic model, it is important to consider the high unemployment rate and the decline in the unorganized sector, which is estimated to account for over 90% of India’s total labor force. “Actually, the need in the economy is increasing,” he says.
Indian views of the super rich
The report may have cost Adani billions and prompted a rethink from institutions — France-based TotalEnergies has shelved a planned joint green hydrogen project with the group and Bangladesh has tried to reconsider an electricity deal with the company — but many ordinary Indians are unmoved.
As India’s opposition parties in parliament questioned Hindenburg’s allegations of the prime minister’s ability to govern and the prime minister’s closeness to Mr Adani, Mr Modi joked that the trust of 1.4 billion Indians was his “shield”.
Delhi-based bank manager Risha Pandey accuses the opposition of causing a stir. “It’s all about politics here. Things are already stabilizing and it won’t affect the market or customers in the long term,” she says. “This will not affect my opinion or my vote. As an Indian citizen, I am only concerned about the progress of India and there has been a big difference in the last ten years.”
Her reaction aligns with many Twitter users who invoked nationalism in support of Adani following the report.
However, there are others, such as financial analyst Raj Pandey (no relation to Risha Pandey) who agree that Mr Adani’s story is linked to India’s but see the journey as a journey of nepotism and exploitation, not mutual prosperity. Mr. Pandey believes the report and has advised his friends against investing in Adani stocks in the past.
“If I saw this for the first time, I would torture myself. But as an Indian, I got used to it,” he says. “If an Indian rises up among us through sheer hard work, then there’s nothing wrong with celebrating that, but if they did it through manipulation, then we shouldn’t do it [be supporting that].”
Avijit Ghosh, a fashion designer, says he is acutely aware of how hard middle-class Indians have to work, while crony capitalism has enabled some individuals to become rich in a short space of time. He believes that “there would be many Adanis in the future” unless there was a systemic change in the way Indian politics works.
“There can no longer be any quick fixes. We have to pull [cronyism] at the roots,” he says.
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