India’s second-largest business group has been making headlines for all the wrong reasons – and the furore is showing no signs of abating
by Sophie Mackenzie
Founded in 1988 by Gautam Adani as a commodity trading business, the Adani Group – with Adani Enterprises as its flagship – grew to include a spread of businesses across energy, food processing, mining, and infrastructure. In 2022 it became India’s highest valued corporation, with Adani himself overtaking Jeff Bezos as the world’s second-wealthiest individual according to some metrics.
Then in January 2023, the US short-seller Hindenburg Research “stunned investors” with the publication of a report alleging widespread fraud and share price manipulation, according to an article for CNN Business by Julia Horowitz. Allegations of “the largest con in corporate history” that took place “over decades” sent the conglomerate’s share price tumbling by almost 55%, writes Horowitz, noting that Hindenburg had skin in the game by taking “a short position in Adani Group companies, meaning it would benefit from a drop in their value”.
Backlash begins
The Adani Group responded by threatening legal action, calling the allegations “stale, baseless, and discredited” and accusing Hindenburg of “a calculated attack on India”. But the financial markets were already taking action of their own, with an “eight-day rout” sending the group’s value plummeting by US$118bn before rallying somewhat on 7 February, as Bloomberg reports.
In India, opponents of the ruling Modi government were quick to make political capital of the scandal, questioning the prime minister’s “closeness with Adani”, according to a Reuters report by Adnan Abidi, M. Sriram and Aditi Shah. Protestors took to the streets waving banners and shouting “slogans against Adani”, and “some broke through barricades, forcing police to detain them”. The crisis is the “biggest business and reputational challenge” the billionaire has faced in his career, according to Abidi, Sriram and Shah. “Both houses of India's parliament were adjourned on Monday, the third consecutive day, amid sloganeering and demands to launch an inquiry,” they write.
What happens next?
Ratings agencies offered lukewarm reassurance that the impact of the crisis on India’s banking sector is likely to be limited, according to Mint, which quotes Moody’s as saying that exposure within the sector was limited to “less than 1% of total loans for most banks”. However, it adds: “Risks for banks can increase if Adani becomes more reliant on bank loans.”
But the political implications of the crisis appear to be deepening, according to a report for the German broadcaster DW by Murali Krishnan. Opposition parties demand an “impartial parliamentary inquiry” into the allegations and the potential impact of the Adani Group’s operations on “the environment and local communities”. Krishnan quotes the opposition Congress party’s communications chief, Jairam Ramesh, who asked in a press conference: “How is it possible that one of India’s largest business groups, one that has been allowed to build monopolies in airports and seaports, could have escaped serious scrutiny for so long despite persistent allegations?”
And the scandal looks to have repercussions beyond India. According to The Wire, “concerns have been raised” over the Adani Group’s involvement in major infrastructure projects in neighbouring Sri Lanka, Nepal and Bangladesh.