Gautam Adani is a self-made Indian billionaire.
We've seen him buy up asset after asset across the country.
Ports, airports, power plants.
Whenever he speaks about his group, he always says that his conglomerate's
goals are aligned to India's goals.
It is the belief in the India growth story
that keeps the Adani Group going.
As recently as just a few months ago,
he was the second-richest person in the world.
To his critics, however, he's a more complicated figure.
Political observers think Gautam Adani
is very close to Prime Minister Narendra Modi.
This is one of the hot topics when Narendra Modi came to power.
On the morning of January 24, about a couple of hours
after sunrise in Mumbai,
journalists across the country were greeted with a large
100-page document from Hindenburg Research, in which it accused
this empire of essentially stock manipulation and accounting fraud.
There was an instant market reaction.
In Adani companies, we’re are looking at losses of north of $130 billion.
The last thing Modi wants is to be involved in any of this muck.
There is no doubt that the government
of India needs empire builders like Adani.
But underlying all of that, there was a sentiment
that if Adani fails, what happens to India's own ambitions?
If you are living in
or visiting this country,
you really cannot be independent
of an Adani asset.
Coal mined from Adani coal mines is transported
through Adani-run ports and railroads into power plants that Adani owns.
The electricity generated from these power plants
then runs through Adani-owned grids into homes built with Adani cement.
He keeps a very, very low profile.
We have not seen him splashing money, buying luxurious cars
or buying yachts or holidaying in luxurious destinations.
The relationship between Adani and Modi goes back
decades, even before Modi was prime minister.
Both of them hail from the same state of Gujarat,
renowned for sending out entrepreneurs around the world.
Adani has grown so big, so fast.
Adani is aligning the business goals of the Adani conglomerate
with the goals of Prime Minister Modi.
If you want to grow a country, you need to build your airports.
You need to build your infrastructure,
such as electricity grids and power plants.
It's very natural that he will lean toward big businessmen,
big conglomerates, big business groups to develop such kind of stuff.
If Modi has come to the world stage as a political leader
who understands the needs of business, Adani has been a big contributor
to building this image.
There’s another level of questioning
about whether Adani is actually funding Prime Minister Modi.
For instance, Prime Minister Modi, when he was campaigning
for his first term in office, he very publicly flew in an Adani plane.
The party claims that they paid
the Adani Group rent for use of this plane.
India's political funding was always opaque,
but since Modi has come to power, there's an added level of opaqueness.
The Adani Group has repeatedly denied financial improprieties
or receiving favors from the government.
Hindenburg Research is a firm
incorporated in New York City.
It was registered by Nathan Anderson,
who is what we would call a short seller.
He exposes discrepancies in accounting
with the intention, of course, of driving down stock prices.
It was a very strongly worded allegation because it said
it's the biggest con in India's corporate history.
It wiped off more than $100 billion itself.
One report and a few trading sessions has taken Gautam Adani
from the top list of the world’s richest men.
There were many allegations in the Hindenburg report against Adani.
The main allegation was that
people close to Gautam Adani used offshore shell companies
to pump up the prices of stock in Adani's listed firms.
He then, according to these allegations, used these pumped up
share prices as collateral to borrow more money from banks.
Bloomberg has investigated some of the funds.
These are all Mauritius entities, a country known as a tax haven
that have little or no information on who are the beneficial owners
of these funds – essentially, where the money trail leads to.
Billionaire Gautam Adani has published a lengthy rebuttal
to allegations of fraud by a short seller, Hindenburg Research.
The report is a malicious combination
of selective misinformation, stale,
baseless and discredited allegations.
The fundamentals of our company are very strong.
Our balance sheet is healthy
and assets robust.
When the Hindenburg report came out, there were several people
in India, nationalists of course being among the forefront of these,
who said that this was just an attempt to malign the image of India.
Gautam Adani's conglomerate saying that any attack towards
Adani Group is an attack towards India's goals.
They were trying to reiterate to us that they never defaulted
any payments in their history
and they always made a number of conservative cash management tactics.
So what does Hindenburg Research’s allegation done to Adani?
The aggressive expansion has been slowed down.
The capex has been slowed down.
You will not see Gautam Adani as the
as the busiest dealmaker in 2023, unlike in 2022.
They are continuing with this process
of prepaying and repaying a whole lot of debt.
That seems to be a very big part
of how they're trying
to portray themselves as this very good corporate citizen, as the opposite,
basically, of what Hindenburg had alleged.
There’s good debt and there’s bad debt.
Of course, you have to have debt, but what is the level of debt you can keep?
That is a key question.
The critical lesson learned in this entire episode is
how robust is your regulatory framework?
How robust is your judiciary framework?
And how good is the Indian landscape to do business?
As India looks to tap Western capital more frequently,
it will necessarily have to adapt to Western ways of doing business.
India will have to open up its accounting books to Western eyes.
The answer to the question of whether the
Adani Group is too big to fail is a trickier one.
It can survive the Hindenburg Research allegations
because it is built on strong fundamentals and it never defaulted.
Next year, Modi, of course, has re-elections.
This is something that Modi will pull
no stops to get at, his party wants that third term in office.
And, once it gets that third term in office, Modi then needs to cement his legacy.
And for that, he needs billionaires like Gautam Adani.