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Fraud Allegations: The Global Businesses of India’s Adani Group


Until recently, he was one of the richest people in the world: the Indian entrepreneur Gautam Adani. Now he is accused of fraud on a large scale. What is behind his corporate empire?

By Charlotte Horn, ARD Studio New Delhi

Who is Gautam Adani?

Gautam Adani is the Chairman of the Adani Group, which operates worldwide. He comes from the middle class, an Indian “self-made man”: He dropped out of school at the age of 16 and began working in the diamond trade in the Indian financial metropolis of Mumbai. From 1988 he trades with his company “Adani Exports” in the import-export business with raw materials. When India opened up its market to the outside world in the early 1990s, Adani took advantage of this and borrowed money again and again. In 1994 he went public with his company and secured the contract to expand an important Indian trading port. From then on things went steeply upwards for the medium-sized entrepreneur.

What connects Adani with India’s Prime Minister Modi?

Like Narendra Modi, the 60-year-old multi-billionaire Adani comes from the western Indian state of Gujarat. While Adani rises as a businessman, Modi makes a career in politics. He is said to have helped the entrepreneur to lucrative contracts – during his time as Prime Minister and now as Prime Minister of India.

When he took office in New Delhi in 2014, Modi flew in a private jet – an Adani aircraft. Shortly thereafter, Adani shares skyrocket. Investors suspect that Adani’s proximity to the new government will pay off. And indeed: the Adani Group’s profits have doubled since then.

What businesses does the Adani Group operate?

The Adani Group has so far been regarded as the most influential company in India. Behind it is a meanwhile multinational network of companies. And that invests – also on behalf of the Indian government – in various areas: in infrastructure projects such as highways, the mining of coal, but also renewable energies. The conglomerate is also the largest operator of airports and industrial ports. Last year, Adani bought two cement manufacturers – and the Indian news channel NDTV, the last independent television station in India at the time.

The parent company Adani Enterprises invests worldwide: in coal mines in Australia, in a shipping company or a food processing company in Singapore. At the end of January, the group acquired a majority stake in Israel’s largest port in Haifa.

Adani Group shares have appreciated more than 1000 percent over the past five years. At the same time, the company accumulated debt through constant new investments. For Jan. 31, Adani Enterprises had announced a major IPO valued at $2.5 billion. But exactly one week before that, a US investment company published a critical report.

What are the allegations from the USA?

On January 24, the news went around the world: US analysts from Hindenburg Research accused the Adani Group of large-scale fraud. With the help of shell companies in tax havens like Mauritius, the group invested money in its own shares and thus artificially boosted their price.

The Americans claim that the value of the company conglomerate has been artificially inflated and that Adani’s listed subsidiaries have “significant debts”. The US investment company bets as a so-called “short seller” on falling stock prices and has already made accusations against other companies in the past.

How did the Adani Group react?

The company rejects the allegations on more than 400 pages and speaks of a “calculated attack” on the Indian economy. The US investment company wants to make profits with unfair means. The Adani Group is considering legal action.

In the report, the company also refers to relationships with the world’s largest banks such as Citigroup, Credit Suisse or Deutsche Bank. For example, Deutsche Bank helped the conglomerate finance Mumbai International Airport with a $1 billion loan. The Adani Group does not answer open questions, for example about the origin of funds from shell companies.

Gautam Adani himself was forced to make a personal video statement. He assured that the ongoing operations of his company were not affected by the turmoil on the stock exchange. The balance sheet is healthy. The Indian multi-billionaire later defended himself in an interview against allegations of nepotism. He does not owe his rise to being close to Prime Minister Modi. But even this reaction did not stop the crash in Adani shares.

What are the consequences for the Adani Group?

The short-term consequence is that the company withdrew a planned share placement. Adani stated that he wanted to protect his investors from losses. At times, Adani shares fell by up to 30 percent a day, and the company’s value collapsed by around half. On Tuesday, however, the papers rose again after the group announced that it would repay certain debts.

The long-term consequences are only likely to become apparent in the coming weeks: According to the financial news agency Bloomberg, several major banks no longer accept Adani shares as collateral for lending.

Adani himself has often proclaimed that the goals of his group of companies matched the needs of India. And it is precisely because of this symbiosis that the country is now feeling the financial extent of the loss. According to Forbes, Adani’s private fortune has shrunk to almost $60 billion.

How are the reactions in India?

India’s Prime Minister Modi has not yet publicly commented on the allegations against Adani. That’s exactly what the opposition criticizes – and also that there hasn’t been a substantive debate on the allegations in the Indian parliament so far. The government had previously refused.

The opposition accuses the government of forcing a state bank and a state insurance company to invest in the Adani Group. This puts the savings of many people at risk. The Indian financial regulator failed. The Indian central bank has meanwhile asked the country’s banks to disclose their ties to the Adani Group.

India’s finance minister defended the government against allegations by the opposition that the Adani Group had been given preferential treatment for contracts. She assured that the Indian financial market is well regulated. According to financial experts, India has so far been a relatively safe market for investors, including those from abroad. The current allegations against Adani could change that. At the same time, Indian regulators now have a chance to investigate the wrongdoing and strengthen the financial market.