You have to be able to afford it first: The Indian entrepreneur Gautam Adani lost around 32 billion dollars within a week. According to the economic service, the fortune of the richest man in Asia fell forbes from 119 billion to 87 billion euros this Monday. Adani, 60, will survive. He no longer ranks third, but still ranks seventh among the people with the greatest net wealth in the world. But the whole thing is now an affair with global political implications. And it’s far from over.
On Sunday, the Adani group presented a 413-page counterstatement of sorts. The Indian group is thus trying to refute serious allegations made by the US investment company Hindenburg last week. “How the third richest man in the world pulled off the biggest corporate scam,” was one of the headlines from the activist and investigative investors. Among other things, the question is whether the Adani Group actually owns companies in offshore tax havens such as Mauritius and the Caribbean, as it claims. It is about the accusation that the gigantic Indian conglomerate has feigned a value that it cannot cover. In any case, the investors say that the Adani Group has “operated on share manipulations and balance sheet falsifications for decades”.
Not only Gautam Adani, but also his “Adani Group” lost about 66 billion US dollars in value on the stock exchange within a week. The company put it this way on Sunday: The loss was the result of a “calculated attack on India”. A high-level counterattack? Well, Gautam Adani’s proximity to India’s Prime Minister Narendra Modi has given rise to speculation for years about the entrepreneur’s influence on India’s economy.
Adani went from high school to billionaire
The story of Gautam Adani is as well known in India as a folk tale: Adanai dropped out of school, was a plastics dealer with a motor scooter and began his economic ascent when India opened its closed market in the 1990s: with its first larger one Adani secured the development of the deep sea port of Mundra, now India’s largest commercial port.
Eventually, Adani and his group became really rich with coal mines and coal-fired power plants. More than 60 percent of his holding company’s revenue comes from the coal business, the company said Washington Post. Nevertheless, it is said that Adani continues to work in a rather unadorned office in his native Ahmedabad in the east of the country. He also shares this ostentatious modesty with Prime Minister Narendra Modi.
Today, the Adani Group not only operates ports, airports and mines, it also produces cement and sells cooking oil. The fact that she recently bought ND-TV, one of India’s last remaining independent news channels, was seen internationally as a warning sign. The proximity to politics does not bode well for freedom of the press in India, which is not doing well anyway: the government has just blocked a BBC documentary in which Modi does not come off well.
Politician Modi and businessman Adani have made careers like fairy tales in lockstep: Gautam Adani comes from the state of Gujarat, and Modi managed political affairs there before he became India’s prime minister. Above all, Modi is concerned about better infrastructure – from which Adani benefited. And when Modi was first elected prime minister in 2014, he flew to New Delhi in a private jet with the purple Adani logo.
Government and business are closely linked
When the Adani group defended itself against the allegations, the choice of decor was once again conspicuous. Chief Financial Officer Jugeshinder Singh stood in front of a giant Indian flag on Sunday that made him look like a government official. “Unfortunately, that’s not entirely untrue,” she commented Straits Times from Singapore: “The Adani Group is now an important vehicle for India’s economic ambitions under Prime Minister Narendra Modi.” So far the imagination.
But now these very real allegations from Hindenburg: offshore funds and shell companies would “secretly” own shares in Adani’s listed companies. The value of the entire group is artificially inflated. Five of Adani’s top seven listed companies have “increased short-term liquidity risk” and unfairly “sky-high valuations,” according to investors who dug through various documents. The companies are “considerably indebted” and the group’s financial basis can be described as “precarious”.
And finally, the investors also criticize the entanglements between management and the founding family: “The top ranks of the group and eight of 22 important executives are members of the Adani family,” says von Hindenburg. This puts control of the group in the hands of a few. In fact, the Hindenburg financial investors are known for harsh allegations against start-ups and established companies, which are sometimes true: The electric truck manufacturer Nikola was convicted of false product promises.
All transactions are properly disclosed, it says in defense
The counter-speech of the Adani group: All internal transactions were properly disclosed, according to the 413-page report on Sunday. Hindenburg himself is also sharply criticized in it. The financial company is a so-called short seller, a short seller who bets on falling prices of a company. “It is a conflict of interest designed only to create a false securities market so that Hindenburg can make massive financial gains through improper means at the expense of countless investors” – as the Adani Group puts it.
So it’s relatively rough going back and forth between the Adani group and Hindenburg. In the current case, Hindenburg explains quite succinctly that Adani’s answer “largely confirmed our findings and ignored our most important questions”, 62 of 88 questions, to be precise. And yes, they are involved in the Adani Group through bonds and hold short positions, the financial investors said.
The Adani Group now wants to sue Hindenburg over the serious allegations. There, in turn, one welcomes that, because in this way one can clarify all questions in court. Meanwhile, the Adani Group wants to place shares – which could be challenging: 2.5 billion dollars are to be collected, but now the price has collapsed.
Hindenburg, however, is aware that all this could also lead to political complications, given the connections between Adani and Modi. And so the investors, for their part, try their hand at appeasement. “We believe that India is a vibrant democracy and a rising superpower with an exciting future,” Hindenburg said. But: “We also believe that India’s future is being held up by the Adani group, who have wrapped themselves in the Indian flag while systematically plundering the nation.” The whole thing could still be material for a film, or a Netflix eight-part series.