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Indian billionaire Gautam Adani, who briefly catapulted himself to become the second-richest person in the world last year, has had a rough week. On Tuesday, he was accused by US-based short sellers from Hindenburg Research of fraud and market manipulation that caused companies he controlled to lose tens of billions of dollars in value.
Adani, who until recently had a larger net worth than Bill Gates and Warren Buffett, is down more than $22 billion on Friday, according to Forbes, which tracks billionaire fortunes in real time. The seven publicly traded Adani companies, which are involved in every sector including energy and infrastructure, lost more than $50 billion in market value this week, Bloomberg News reported.
Hindenburg, best known for a 2020 report on misrepresentations at electric vehicle company Nikola, said in a study released after a two-year investigation that Adani committed the “biggest fraud in the company’s history.”
Adani Group, the billionaire’s holding company, named Hindenburg’s charges “Baseless and discredited” and suggested that the report was malicious and timed to a secondary Sale of shares in one of his companies.
Here’s what you should know about the allegations surrounding India’s energy baron, who is Asia’s richest person.
Adani, 60, had humble beginnings. Born to a textile merchant family in the western state of Gujarat, Adani spent his early career as a small plastics merchant traveling by scooter.
His big break came after India began liberalizing its economy in the early 1990s and he was tasked with developing a deep-water port at Mundra, which is now home to the country’s largest commercial port. From there, his company quickly expanded into infrastructure, logistics and energy, with coal-related businesses fueling his rise.
James Crabtree, an India specialist who has written a book about the country’s billionaires, described Adani as “modest” in a 2018 Australian Financial Review article.
“Both at home and abroad, he also displayed a casual approach to debt … in a process that positioned him as perhaps the most financially aggressive of India’s newest generation of billionaires,” wrote Crabtree, who also noted that the tycoon was in an unpretentious manner Office worked in his home state. (Adani is also a close ally of Indian Prime Minister Narendra Modi, who previously ruled Gujarat.)
Adani’s net worth has grown rapidly amid a broader boom in Indian capital markets, from $9 billion in 2020 to $127 billion in December. Forbes said Friday it was worth nearly $97 billion.
How big is the Adani empire?
Very very big. Adani’s companies operate major Indian seaports, produce cement and sell cooking oil. He also recently acquired New Delhi Television, a leading English language news channel which was one of the last networks to be considered journalistically independent.
But coal remains at the heart of his empire, and according to Global Energy Monitor, he’s the largest private developer of coal-fired power plants and mines in the world. More than 60 percent of his holding company’s earnings come from coal deals, the Washington Post reported in December.
His empire now extends to sectors such as defense, renewable energy, transmission and infrastructure.
What are Adani’s connections to Narendra Modi?
Adani’s dizzying rise parallels Modi’s political career. The two men first met in their home state of Gujarat in the 1990s, when Adani was an aspiring businessman and Modi was a promising mid-level official of the Bharatiya Janata Party.
In the decades since, Adani has juggled ties with political leaders from across India, but the two have appeared to be meshing, officials from both men previously told The Post. The politician oversaw an infrastructure boom when he ran Gujarat and came to respect Adani as a capable operator, a former Modi aide has said.
How often the political will favors a coal billionaire and his dirty fossil fuel
After Modi was first elected prime minister in 2014, he flew from Gujarat to New Delhi on a private jet. A smiling Modi waved from the steps while Adani’s purple logo appeared behind the plane. (Adani said in a 2016 interview with the Economic Times newspaper that Modi’s plane was not used “in vain.”)
The Post reported in December that the Indian government had changed laws on at least three occasions to help its coal companies, saving it at least $1 billion in the process. Critics including Adani Watch, an Australia-based nonprofit, said that if the Hindenburg allegations prove true, they are “just another example of what happens when crony capitalism and regime favoritism create a perceived culture of impunity. “
An Adani spokesman declined to address the billionaire’s political ties when given a list of questions ahead of the Post’s December report. An Adani employee, who spoke on condition of anonymity because he was not authorized to speak publicly, told The Post that the billionaire’s success was due to his ability to support Delhi’s economic priorities, such as B. Developing ports for coal transport when India faced shortages Building coal-fired power plants when the country needed electricity.
What are Hindenburg’s cheating allegations?
Hindenburg released a report that accused the Adani group of, among other things, artificially inflating the stock prices of their companies for several decades using a network of foreign shell companies linked to Adani’s family members. Hindenburg argued that Adani’s companies were overvalued by more than 80 percent on the Indian stock market as a whole.
Billionaire investor Bill Ackman in a tweet Thursday called Hindenburg’s report “highly credible” and “extremely well researched.”
Indian markets halted trading of some Adani subsidiaries on Friday after a large sell-off.
Adani said it would seek legal action against Hindenburg, which it would welcome challenge.
The sell-off has cast doubt on the fate of an Adani company’s $2.45 billion second sale, which opened on Friday. A market analyst said he was monitoring whether the company would withdraw its bid or lower its bid price.
The sharp fall in share prices means that “markets took the content of the report seriously,” said Hemindra Hazari, an independent research analyst.
The allegations call into question the integrity of Indian capital markets, said Andy Mukherjee, an Indian economic commentator writing for Bloomberg Opinion.
“This puts the Indian regulator in a difficult position as to what to do next: try to restore investor confidence by thoroughly investigating allegations of market manipulation, or dismiss them as the work of foreigners jealous of India’s rise ?” he said in an email.
The case has also raised questions about the amounts borrowed by India’s public bank Adani. According to Hong Kong brokerage firm CLSA, public sector banks hold about 30 percent of the Adani Group’s debt. The company said the risk is manageable, even though the debt of the group’s five largest companies has doubled to $25.7 billion in the past four years (as of March).
Gerry Shih and Anant Gupta in New Delhi contributed to this report.