Indian business tycoon Gautam Adani is in the eye of a storm after a dramatic crash in the stocks of his companies.
Adani’s businesses have lost more than $100 billion after a U.S. investment firm, Hindenburg Research, alleged that the companies engaged in stock market manipulation and fraud. The Adani Group has called the allegations “nothing but a lie.”
The rout faced by the Adani conglomerate, which spans such key areas as ports, power generation, airports, mining, and renewable power, has raised fears of a potential loss of investor confidence in India’s growing economy. It has also triggered a political storm, with opposition parties demanding a probe into the accusations of malpractice against a business figure perceived to have close ties to Prime Minister Narendra Modi.
The spectacular rise of the Adani empire over the last decade has catapulted Gautam Adani into the realm of the world’s wealthiest people. He was ranked as the world’s third richest, and Asia’s richest man by Forbes, behind Bernard Arnault and Elon Musk until late January.
That ranking has tumbled since seven listed companies of the Adani group lost nearly half their market capitalization after Hindenburg raised doubts over the business practices of the conglomerate. In a report, it accused the group of artificially boosting share prices by funneling money into stocks through offshore tax havens. The report said the shares were overvalued and their prices had soared more than 800% in the past three years.
Hindenburg is a small investment firm known as a short seller on Wall Street. The firm looks for corporate wrongdoing and makes money if stock prices of the company fall.
Hindenburg said that the "brazen stock manipulation” and accounting fraud by Adani Group was "the largest con in corporate history." It also said that “substantial debt” puts the group on a precarious financial footing.
In a 413-page response, the Adani Group called the report baseless and a “malicious combination of selective misinformation” and “stale, baseless and discredited allegations.” It said the charges were driven by “an ulterior motive” to allow the U.S. firm to make financial gains.
In a video message to investors Thursday, Adani said that the fundamentals of his group are "strong" and that its record on paying back debt was "impeccable.” The Adani Group called the report an attack on the "growth story and ambition of India."
Hindenburg countered by saying, “India’s future is being held back by the Adani Group, which has draped itself in the Indian flag while systematically looting the nation.”
The controversy has turned a spotlight on the dizzying rise of the 60-year-old businessman, a college dropout from a middle-class family, who began as a commodities trader before expanding into infrastructure in the 1990s when he built a port in Gujarat state and made a foray into areas such as coal mining. Then came power plants, airports, roads and defense equipment, areas he said were in step with the country’s need for infrastructure. The group became one of the country’s top three conglomerates.
He has also made investments overseas -- on Tuesday, even as the controversy raged, Adani stood with Israel’s Prime Minister Benjamin Netanyahu, as he took control of Israel’s Haifa port, acquired for $1.2 billion. In 2011 he bought a large coal mining operation in Australia. Other investments are lined up in Sri Lanka.
Adani hails from Gujarat state, which Modi headed as chief minister before arriving on the national stage in 2014. Critics point out that his dramatic expansion has coincided with Modi’s rule.
(SJ/VOA)
