By P. Sudhir
A small US investor firm has challenged the Indian behemoth, the Adani group, and shaken it to its foundations. The Hindenburg Research, a short selling firm, brought out a 129-page report on the Adani group marshalling evidence of all the funding operations and offshore activities of the 578 subsidiaries and shell companies linked to the seven listed companies of the Adani group. The report states that this is the “biggest con in corporate history”.
The report lays bare the complex network of funds and shell companies, some of them in Mauritius, Cyprus and UAE which have been used for manipulating the share prices of the listed companies and to shift money on to their balance-sheet “to maintain the appearance of financial health and solvency in the midst of high debts and few liquid assets”. The report estimates that the valuations for the Adani companies were overstated as much as 85 per cent. The report accuses the Adani group of having “engaged in brazen stock manipulation and accounting-fraud scheme”.
The Adani group responded by calling the Hindenburg report a “calculated attack on India”. Having no worthwhile defence to put up, the Adani group sought cover under nationalism to cover its flanks. It declared that this was an attack on “independence, integrity and quality of Indian institutions and the growth story and ambition of India”.
The effect of the Hindenburg report was instant. In the week following the report, the Adani group lost $67 billion, or, around Rs 5.6 lakh crore of market capitalisation in the stock market. Gautam Adani himself has lost about $ 50 billion of his wealth and from being the third richest man in the world, he has fallen to the fifteenth position.
The fraudulent dealings of the Adani group are of great concern to the people because, over the years, what have been looted are the country’s natural resources and public funds. The Adani group has become, thanks to the patronage of the Modi government, the largest private operator of ports, airports and the biggest in grain warehousing and controls a fifth of power transmission and the cement industry. It is the largest thermal power private producer in the country with large stake in coal mining.
Much of its acquisitions and assets have been facilitated by loans from nationalised banks and investment from institutions like the Life Insurance Corporation. Around Rs 80,000 crores of funds from LIC are invested in Adani companies and 40 per cent of all loans taken by the group from banks are through the State Bank of India. The crash in the share prices of the Adani group companies are, therefore, a threat to the people’s savings and public funds.
The Hindenburg report came on the eve of an Adani open share offer to raise Rs 20,000 crores. Despite the crash in share prices of the Adani group of companies, the offer was finally fully subscribed due to big amounts of money put in by non-institutional investors which included high net worth individuals. In an act of class solidarity, it is reported that leaders of big business like Mukesh Ambani, Sajjan Jindal, Sunil Mittal and Pankaj Patel put up money to buy shares. However, the very next day, Adani enterprises cancelled the issue of shares and declared it would return the money to all the investors. This sudden decision seems to be motivated by the fact that allegations have arisen that two Adani front companies have invested in the follow-on offer.
The meteoric rise of the Adani group and its rapid expansion has not gone unquestioned in India. Over the years, many serious questions and accusations were leveled at the way in which Gautam Adani went about building his empire. Charges of over-invoicing of coal imports, opaque offshore funding of his companies, gross violation of environmental norms and bending of rules and regulations to get projects through were frequently raised in the media and by business analysts. But none of these found any response from the regulatory agencies like the SEBI and RBI or enforcement agencies like the ED.
The Adanis have used their financial and political clout to intimidate and suppress journalists who questioned their dubious dealings. Civil defamation suits were filed against journalists and news outlets who carried any stories about the questionable deals of the Adanis. For instance, a hundred crore defamation suit was filed against The Wire in November 2017 for carrying a report questioning why the Indian Oil Company and GAIL India were investing in Adani’s LNG Terminal. Other journalists who face such defamation cases are Paranjoy Guha Thakurta for writing in the Economic and Political Weekly, Ravi Nair and other journalists. The Adani group has sought to silence the media through law suits.
The real lessons from the Adani-Hindenburg saga should not be obscured in the welter of charges about stock manipulation, money laundering and accounting fraud and counter-charges regarding the conspiracy to malign India’s top most industrialist.
The Adani story is incomplete without viewing the rise of India’s richest man as an outcome of the patronage and protection offered by Narendra Modi. The nexus between Modi and Adani began in 2002 when Modi became the chief minister of Gujarat. Since then, the fortunes of Adani became intimately linked to the political trajectory of Narendra Modi, who eventually reached Delhi as the prime minister in May 2014.
Adani’s wealth which was Rs 50.4 thousand crore in 2014 increased to Rs 10.30 lakh crore by 2022. Modi’s favourite capitalist had a free run. No regulatory agency or governmental authority could touch him. The impunity with which the Adani group pursued its business interests is one of the worst examples of crony capitalism in contemporary times. The Modi-Adani nexus symbolises the Hindutva-corporate alliance, which is ruling the country today. Adani is confident that with the backing of the Modi government, he can weather the storm. But for the citizens of this country, who are seeing democracy being demolished and their livelihoods threatened by the communal-corporate nexus, it is essential that the Adanis be held accountable for the plunder and ill-gotten gains.
It is, therefore, necessary to wage a determined struggle to see that the regulatory bodies and law enforcement agencies investigate the entire financial and business activities of the Adani group. A high level investigation team must be constituted to go into the allegations levelled by Hindenburg Research against the Adani group and it should be monitored by the Supreme Court. (IPA Service)