Gautam Adani of India: One of the world’s richest men becomes a short seller’s target

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With a stock-based fortune of up to $118 billion, India briefly overtook Jeff Bezos as the world’s second richest man last year — becoming the face of a fast-growing economy that this year will become the world’s most populous country.

The industrialist who once described himself as an “introvert” basked in his newfound fame, cohabiting with world leaders including French President Emmanuel Macron and then British Prime Minister Boris Johnson.

But this week, Adani and his sprawling business empire have been in the unwelcome and costly spotlight. Hindenburg Research, a US-based short-selling firm best known for its targeting of Twitter and electric car startup Nikola, said it has taken positions against listed Adani Group companies such as Adani Enterprises and Adani Green Energy. Hindenburg accused the group of “pulling the biggest hoax in the company’s history”.

The report eliminated more than $40 billion out of the total $200 billion market capitalization of the seven listed founder and principal companies.

Hindenburg, which said it had spent two years on its investigation, alleged that the Adani Group had “engaged in brazen stock manipulation and accounting fraud scheme for decades”. Among its allegations was that a relative of Adani used outside entities to launder money in the group’s listed companies, which contributed to the “extremely high valuations” after stock prices soared over the past three years.

Hindenburg also questioned what she said was significant leverage in the group’s entities.

Jugeshinder Singh, the group’s chief financial officer, dismissed Hindenburg’s claims as “a virulent mix of selective misinformation and unfounded and meaningless allegations”. The Adani Group said it was operating “in accordance with all laws” and said it was considering “corrective and punitive measures” against the Hindenburg.

The group also questioned the timing of the report, as Adani embarks on a $2.5 billion equity flotation in India that is set to close next week.

As the Adani Group’s interests stretch from heavy industry to the media – and its status as a leading employer and taxpayer – the challenge to the group’s integrity is important for India Inc, its financial markets, regulators and politicians. It comes as Adani has embarked on an ambitious international expansion, mobilizing global partners and investors to support the group.

“Given the scale, impact and scale of their investments, this is something everyone will look at now,” said Amit Tandon, managing director of Institutional Investor Advisory Services, a Mumbai-based proxy advisory firm.

Questions about Adani’s personal integrity are further echoed by his long-standing relationship with Prime Minister Narendra Modi, who hails from the same state of Gujarat.

The businessman’s ties to Modi are under intense scrutiny from critics, who accuse the Adani Group of using its powerful position to secure treasured deals. In 2019, for example, the group bought each of six airports privatized by the government, after rule changes allowed a company with no prior experience to quickly become one of India’s largest airport groups. One opposition leader called it “an act of brazen nepotism”.

Al-Adani, 60, acknowledges that aligning business interests with government policy has given him a “tailwind”. But he denies any wrongdoing. When asked in a televised interview this month by India Today’s Rajat Sharma about his relationship with Modi, he said that “one cannot take personal help from Modi ji,” using an homage to the prime minister. In response to a question about bids, he said that “not a single business has been secured without bids being submitted.”

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The billionaire has presented his life story as that of a self-made man, who made his first money under a government run by the opposition Congress party.

Adani was born in Ahmedabad in 1962 into a middle-class family, with a father who was a textile merchant. He left school at the age of 16, dropping out without a degree to work in Mumbai.

He became involved in the diamond business, and after four years returned to Gujarat to run his brother’s plastics factory. He started borrowing on a single business basis to fund expansion into new businesses. Adani developed a port and special economic zone at Mundra, Gujarat, which was to grow into one of the largest in India and the center of his business empire, with facilities including a coal-to-plastic plant and a copper smelter on site.

Adani has pushed aggressively towards renewable energy, aligning himself with the government’s ambitious decarbonization targets, while remaining one of India’s largest operators of coal-fired power plants. Last year, he launched a successful antagonistic show for flagship channel NDTV — a move critics said ominous for shrinking press freedoms in India — and then said he aimed to build its “global footprint”, giving India an outlet to match Al Jazeera.

Hindenburg’s questions now bring more attention to the fundamentals of the Adani group of companies, including the source of the company’s valuations that made him one of the world’s richest men.

During the India Today interview, Adani brushed off talk of his soaring wealth — “I don’t chase numbers,” he said — and dismissed the question about what would happen if the “Adani bubble” burst, saddling banks with unpaid debts.

He replied, “This balloon will continue to fly as long as India progresses.”

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