The Adani Fiasco

Introduction

For a while now this name and the controversy, the buzz surrounding it has given multiple field days to the newspapers, the news channels and of course the citizens of this country to talk about and discuss about. Gautam Adani, a name which was added as the world’s third richest man very recently and whose praises had been sung by the public and the media alike was at the very centre of attraction when this scandal was bought up. So first let’s give him a brief introduction- Gautam Adani, one of the most popular names in this country is the founder and the chairman of the multinational conglomerate- The Adani Group which controls port management , power generation and transmission , renewable energy , mining , airport operations , natural gas, food processing  and infrastructure . Before all this drama and the scandal involving him, he was listed as the third wealthiest man on the planet with a net worth that ranged to over 120 billion USD by Forbes. This figure has now been cut down to almost half and he barely cracks the top 20 list now after the controversy. So now let’s get to know what really went down.

The Hindenburg Report

Another term everyone may have heard regarding this controversy in the recent times is the HINDENBURG REPORT. Hindenburg is a forensic financial research firm which analysis equity, credit and derivatives. After finding potential wrongdoings, Hindenburg usually publishes a report explaining the bets and the case against the target company, hoping to make a profit.

A report was published by Hindenburg in late January 2023, which was extremely critical of the finances of the Adani Group. To be precise, the group which had short positions in Adani companies through US traded bonds and non-traded Indian derivative instruments said key-listed companies in the group had “SUBSTANTIAL DEBT” and that this has put the group on a “PRECARIOUS FINANCIAL FOOTING”. What made things worse for Gautam Adani was the fact that the release of this report happened to be just ahead of a Rs.20000 crore follow on public offer by the Adani Group’s flagship firm, Adani enterprises. Among other allegations, the report says that Adani Group engaged in stock price manipulation and accounting fraud over the course of decades, and found evidence that the group’s “7 key listed companies have 85% downside purely on a fundamental basis owing to sky-high valuations.” It also said that substantial debt puts the group on “precarious financial footing.”

The report names several family members—like Gautam Adani’s brothers, Rajesh and Vinod Adani, as well as associates of the Adani Group—for their involvement in major bribery and tax evasion cases. Members of the Adani family have been the subjects of past corruption cases. Members of the Adani family have been the subjects of past corruption investigations carried out by the Securities and Exchange Board of India (SEBI) and the Directorate of Review Intelligence. The Hindenburg report also claims that Adani family members allegedly cooperated in the creation of offshore shell entities worth $4.5 billion through forged documents, primarily in tax-haven jurisdictions like Mauritius, the UAE, and the Caribbean islands. Hindenburg said that SEBI was still investigating a case in Mauritius in September 2022, but that no action has been taken against the group so far.

An interesting fact to be noted is that the billionaire business tycoon is known to have close ties and connections to India’s Prime Minister, Mr Narendra Modi and so it wasn’t much of a surprise when the Adani group’s rebuttal to the situation was done with a 413-page response that tried to awaken nationalist sentiments in many and even went ahead to call the report a calculated attack on the country as a whole. The exact words used were- “This is 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.”

The Hindenburg Rebuttal called this out and said that Adani was trying to stoke a nationalist narrative that seeks to conflate his meteoric success and rise in wealth with that to the rise of the country as a whole.

Narendra Mode, Prime Minister of India with Gautam Adani

The Effects

Things have taken a political turn in India as the opposition parties have begun to question and allege the Prime Minister and the ruling party’s agenda of trying and protecting Mr Adani as till now proper enquiries or actions have not been taken from the side of the government. These allegations have been rubbished by the ruling right wing Bharathiya Janata Party(BJP). From a market perspective, investors were alarmed when these reports came out and immediately started offloading their shares as the company’s fortunes unravelled. While Adani shares continued to collapse the Nifty 50, the benchmark index for India’s national stock exchange dipped by only one percent which also led to many analysts concluding that the markets viewed this as an Adani problem more than an Indian problem and this also worked against the nationalist narrative Mr Adani was allegedly trying to stokeHundreds of members of opposition parties are also concerned, taking to the streets in rowdy protests to demand a full investigation into the allegations against the Adani group. Some protesters scaled police barricades and were detained, while others burned suitcases plastered with the images of Adani and Modi.

Nationwide protests demanding a fair investigation into the issue

The abrupt and dramatic dip in stock prices is raising questions of whether the Adani Group’s companies can cover their costs going forward, with their large debt load.After the conglomerate announced it would pay back $1.1 billion US in loans ahead of schedule, in a bid to calm investors, Adani’s stock rebounded somewhat this week. The loans weren’t due until September 2024, and included shares in Adani’s ports business.

Now many may ask what next. Well as made abundantly clear by whatever has gone down regarding this scandal, Gautam Adani is extremely powerful with the most powerful people in this country defending him and protecting him. The scandal has already lost the head it had even among the media and the general public. However the group has also seen huge losses and so has Mr Adani’s personal finances. All that can be done is hope that any more wrongdoings by the group is brought into public light as was this and those involved are called out.