It was only a week ago that everything looked bullish for the wealthiest man in Asia. Indian tycoon Gautam Adani had just ushered his namesake megacorporation, the Adani Group, through years of vertiginous growth. While other firms were bruised by India’s economic travails during the pandemic and the Russia-Ukraine war, Adani took advantage of his friendship with Prime Minister Narendra Modi to gobble up businesses across various sectors and execute major infrastructure and energy projects on the subcontinent. Adani’s riches and renown flourished as his empire took on everything from agriculture to shipping; he became a villain in Oceania for his fossil fuel projects, and at home for taking over a major news channel. 2023 was looking sunny, with the $260 billion Adani Group fresh off a stupendous boom in stock value and perched to raise about $2.5 billion through a follow-on offering—or FPO—for its holding company and flagship brand, Adani Enterprises.
Then, the bomb hit hard. Last Tuesday, the Wall Street short-selling firm Hindenburg Research released a 100-page report on Adani’s companies, accusing their founder of “pulling the largest con in corporate history.” Describing a two-year investigation, Hindenburg accused Adani and his executives of having ties to seedy criminal enterprises, sidestepping multiple fraud investigations, using offshore companies to manipulate revenue figures, and severely inflating the stock prices of companies within the Adani conglomerate. The small research firm, known for investigating and exposing sketchy companies, then took a short position on Adani securities traded outside of India.
The blast radius was enormous. By Friday, Adani corporations had lost $51 billion in market capitalization, with some of their share values plummeting 20 percent; Indian stock exchanges halted trading of many Adani properties to stanch the damage. The Adani Group released a 413-page response on Sunday that called the Hindenburg report a “calculated attack” on the entire nation of India and accused the firm of targeted market manipulation and fraud. (Hindenburg countered that very day.) This rhetoric, which went so far as to compare the New York short sellers to murderous British colonizers, helped little: On Monday, Adani stock continued to plunge and the CEO himself shed up to $41 billion of his own net worth. As of now, it seems he was able to dredge up enough cash—thanks in large part to a last-minute surge in foreign investment—to successfully close out the Adani Enterprises FPO. Yet that success has come with extensive damage to Adani’s reputation, credibility, and market standing. (There’s even a vibrant hashtag on Twitter: #AdaniScam.) He went from being the world’s second-richest businessman to only the 11th-richest.
Why does this matter? Are there any broader implications, not only for Indian politics and business, but the entire global economy? Is calling a short-selling firm Hindenburg a little too on-the-nose? (Yes.) Allow me to explain.
OK, give me the quick history of this Adani guy.
Sure thing. Gautam Adani’s fortune and rise to power are entangled with the story of modern Indian politics: The businessman got his start in the late 1980s and early 1990s, right as India began liberalizing its government-dominated economy by encouraging more private enterprise, deregulating industries, and opening up to globalization. As James Crabtree noted in his book The Billionaire Raj, Adani took advantage of this moment to launch a plastics-importing business for which he vertically integrated the supply chain, buying and developing his own trading ports on the coast of his home state of Gujarat. Throughout the ’90s, he expanded his empire to include railroads, textiles, and geothermal power.
Adani’s real shot at success came after the turn of the century, when Narendra Modi was elected chief minister of Gujarat. The two established a close relationship; when Modi faced international controversy early on for his alleged role in 2002’s fatal Gujarat riots, Adani was one of the few India businessmen to staunchly defend Modi from accusations of fomenting interreligious violence. In fact, Adani went on to launch business alliances and events that relentlessly promoted Modi to the world, facilitating the chief minister’s eventual rise to national power—and cementing a friendship that won Adani’s companies numerous contracts both with Gujarat and with officials from Modi’s political party. By 2008, Adani was a billionaire and the largest coal player within the entire country.
Modi was eventually elected prime minister in 2014 thanks in no small part to Adani’s yearslong boosting, and the demagogue returned the favor in flagrant fashion: He flew on Adani-branded jets (the plutocrat had expanded into aviation by then), took the businessman with him on public trips and meetings, and even threw him a government-backed billion-dollar loan to support the construction of a coal mine and related infrastructure network in Australia. As Adani’s business and net worth ballooned under Modi’s reign—especially during the pandemic—and the CEO was lavished with government contracts, detractors of the right-wing, business-friendly Modi accused him of engaging in the same sort of crony capitalism he’d campaigned on ending. After all, during his initial run for prime minister, Modi had denounced his predecessors (fairly!) for their rampant corruption. Yet the new boss now seemed to resemble the old ones.
Adani’s companies became evermore intertwined with India’s welfare, as they became the country’s dominant firms for sectors like shipping, energy, and mining. He was in so deep that many of India’s biggest controversies included links to Adani by sheer proximity, like the sweeping farmers’ protests in 2020 and 2021, an ongoing plague of information censorship from the press-hostile government, and the stubborn resilience of the country’s fossil fuels. Adani also sent shockwaves through the brittle Indian mediasphere last year after he carried out a hostile takeover of NDTV, a storied television broadcaster formerly viewed as one of the country’s few truly independent journalism institutions. Critics feared that Adani’s ownership and influence would gradually turn NDTV into yet another propaganda channel for his pal Modi.
So what is Hindenburg, and how did it cause such a stir?
Hindenburg Research was established in 2017 by Nathan Anderson, who’d become a name on Wall Street a few years earlier after tipping off the U.S. Securities and Exchange Commission to fraudulent practices by a billion-dollar hedge fund, with evidence based on research he’d conducted. Anderson decided he enjoyed this sort of probing and launched Hindenburg in order to analyze and bet against firms he’s determined are sketchy—to great success and controversy. Though Hindenburg is tiny, with only about five staffers, it is potent: In 2020, it gained notoriety after calling out the hot electric vehicle startup Nikola for “intricate fraud,” thus demolishing the company’s stock price and setting its founder up for federal investigation and indictment. In a time of rising “activist investing,” Hindenburg continued its successful track record of investigating and shorting businesses that seemed kinda off, earning plaudits from the financial world.
So Hindenburg’s titular research is pretty legit, huh?
Absolutely, which is likely why Adani reacted so strongly to the report.
And the complaint here that Adani’s gargantuan business network is a bit crooked?
Indeed. To be clear, such claims aren’t necessarily new. As far back as 2015, Credit Suisse had raised concerns about Adani Enterprises’ rapid pace of acquisitions and massive debt buildup. By the 2020s, financial organizations like Dealogic and Creditsights also suspected that Adani was overleveraging his debt as he bought up company after company. And in 2021, investors worried over Adani’s sources of backing when the Economic Times reported that three Mauritius-based funds with Adani investments had had their accounts frozen in their native country. Still, he got through it just fine.
What the Hindenburg report has done is to build on this scrutiny of Adani’s debt to claim explicit wrongdoing on the magnate’s part, through interviews with former Adani Group executives, analysis of internal documents, and on-the-ground reporting from various countries. Calling back to the earlier Mauritian scare, Hindenburg Research counts “38 Mauritius shell entities” used as tax havens, in tandem with other shell companies in nations like Panama and the United Arab Emirates that route undisclosed funds to Adani’s private businesses—which then appear on the public companies’ balance sheets. The report also accuses Adani of insufficient accounting oversight, noting that Adani Enterprises and Adani Total Gas are reportedly audited by a firm that has no online presence, a small staff, and a limp track record of any actual audits. Several Adani associates are also accused criminals, including the Amicorp Group, a core part of the Malaysian 1MDB scandal. Overall, Hindenburg draws on such findings to claim that Adani company shares are overvalued by as much as 85 percent.
Doesn’t seem great!
It does not! And if Adani’s assets are bad, that means a lot of other cash is exposed. Just last month, Gautam Adani himself admitted that Indian banks have a 32 percent share in his companies’ loans, and that half of the Adani Group’s borrowing is done through international bonds. If Adani Enterprises ever went under, that would mean a wipeout of investments and projects parked in several countries, along with a heavy hit to large-scale development within India. Plus, Modi himself would likely face questions about his extensive patronage of his friend, and international investors who’d been bullish on India’s overall business climate just months ago might become more pessimistic.
But Adani’s business has survived this kind of thing, right?
For now, yes. Even though some significant trustees withdrew, the FPO has met its target thanks to a splurge of last-minute investments over the past couple days, including nearly $400 million from Abu Dhabi’s International Holding Company. Still, Adani has not been left unscathed. The goal of the FPO was to diversify his investor base from larger sources corporations in order to attract more retail investors; that didn’t really happen. His share prices, company valuations, and personal net worth remain lower than preferred. He faces renewed government investigation, and activist investors are calling on bondholders to stop funding his coal empire, which constitutes about 60 percent of his conglomerate’s total worth. Plus, India’s multitrillion-dollar stock exchange is no longer one of the world’s top five most valuable, and financiers interested in the country may have a lot more questions about how things are done there. Adani may have held the line this past week. But his ground seems to be shrinking.