Indian corporate empire: Adani suffers 100 billion crash

Indian entrepreneur Gautam Adani is one of the richest people in the world. Serious allegations have now been made against him. A planned IPO has been canceled for the time being, and its shares are in free fall.

At the celebrations earlier this week in the Israeli port city of Haifa, Gautam Adani clearly enjoyed the attention. A subsidiary of the Adani Group has just acquired a majority stake in the country’s largest port. In his speech, Adani announces the “right investments”: “And I promise you that in the years to come, we will change the skyline that we see around us.” The Indian billionaire did not show the current allegations against him at the appointment in Israel. And the allegations are fierce: market manipulation, lack of transparency and accounting fraud.

Doubts about the assets

The Indian billionaire leads the Adani Group, a multinational company empire that invests very influentially in many areas – also on behalf of the Indian government: in energy supply, coal mining, airport operations and the media. A US investment company with the name Hindenburg Research, which is unusual for German ears, has now published a report. In it, the analysts express doubts about the assets of the Indian group of companies. There is also talk of front companies in tax havens.

The Adani Group rejects the allegations and speaks of legal action against the New York-based company. CFO Jugeshinder Singh expressed outrage in a released video statement. In the picture next to him: the Indian flag. “The timing of the release of the report clearly betrays a brazen, malicious intent,” Singh said. “With the primary aim of damaging the pending IPO of Adani Enterprises – the largest IPO ever seen in India.”

IPO canceled at short notice

Adani is considered a close companion of India’s Prime Minister Narendra Modi. He interprets the report from the USA as a targeted attack – also on the Indian economy. The planned IPO of the Adani Group involves a sum in the tens of billions. But then the surprise last night: the billionaire withdrew the IPO and referred to the price fluctuations on the market in a video statement.

“Our board firmly believed that it would have been morally wrong to proceed with the IPO,” Adani said. “Throughout my humble journey of more than four decades as an entrepreneur, I have been fortunate to have received overwhelming support from our shareholders, particularly the investment community.”

Panic selling on the stock market

Adani’s group of companies have lost more than $100 billion in value as a result of the crash. Shares fell about 30 percent. In India in particular, the report led to panic selling.

The Indian analyst Arun Kejriwal also sees clear calculations behind the US analysis in an interview with the AFP news agency. “The aim is to foment panic and make money from it. I believe that what they did was out of self-interest and not in the interest of shareholders in general,” said the market observer.

“Breathtaking” allegations

Economist Arun Kumar, on the other hand, sees substance behind the allegations. He speaks of nepotism. It is quite common in India “that you have connections with those in power and you use them to get loans and you also use them to increase your company’s shares in the stock market, through insider trading and various other things,” he said the economist. “But what the Adanis have done is breathtaking.”

Interviewed by Reuters news agency this week, outside the Indian Stock Exchange in Mumbai, stock traders appeared unperturbed by the ongoing slide in Adani shares. Adani is a “very powerful person and he’s very smart,” according to traders. “So we can’t say the impact on the stock market will be long-term. It’s possible it’s just a short-lived negative trend.”