Thursday, March 28, 2024 | Ramadan 17, 1445 H
broken clouds
weather
OMAN
23°C / 23°C
EDITOR IN CHIEF- ABDULLAH BIN SALIM AL SHUEILI

Indian tycoon’s conglomerate shaken by market rout

Gautam Adani, the founder India’s Adani Group, whose net worth of $120 billion makes him the richest person in Asia, at a hotel suite in Boston on Oct. 26, 2022. (M. Scott Brauer/The New York Times)
Gautam Adani, the founder India’s Adani Group, whose net worth of $120 billion makes him the richest person in Asia, at a hotel suite in Boston on Oct. 26, 2022. (M. Scott Brauer/The New York Times)
minus
plus

The conglomerate controlled by Gautam Adani, a politically connected Indian industrialist, lost about $50 billion in value this week after it was upended by a small investment firm in New York.


Late in the day on Tuesday, Hindenburg Research, a firm that made its name by betting against cryptocurrency companies and unprofitable electric vehicle makers, published a report accusing the billionaire tycoon’s company, the Adani Group, of “a brazen stock manipulation and accounting fraud scheme.” After an initial market wobble on Wednesday, trading paused on Thursday, when markets in India closed for the country’s annual Republic Day.


But when trading resumed on Friday, some of Adani’s companies dropped 20% in frenzied trading, the maximum allowed by exchanges, before trading was halted. India’s benchmark stock index fell 1.6% that day, its worst drop in more than a month. Overall, the Adani Group lost about one-fifth of its value since the Hindenburg report was released.


In a series of rebuttals, the Adani Group has dismissed Hindenburg’s allegations, calling them “a maliciously mischievous attempt” to profit by sinking its shares. “The volatility in Indian stock markets created by the report is of great concern and has led to unwanted anguish for Indian citizens,” the company’s legal chief said, and threatened to sue.


Hindenburg is what’s known on Wall Street as a short seller, which makes money via investments that pay off when a company’s share price falls.


The speed and scale of the Adani Group’s losses mirror, in miniature, its rise to international prominence. In the 1980s, Adani founded a polymers import-export business that became the basis for his conglomerate, which today encompasses holdings in ports, power, food, and more. The group’s growth surged in recent years, as it expanded into airports and renewable energy.


Adani, 60, became Asia’s richest person. Last summer, he surpassed Mukesh Ambani, another empire-building tycoon from the state of Gujarat, according to the IIFL Wealth Hurun India Rich List.


Apart from the wild swings in the value of his companies, what stands out about Adani is his close connection to Narendra Modi, India’s prime minister. Both came up in Gujarat, and their fortunes have been tied together ever since.


Ambani, the second-generation boss of India’s other most powerful conglomerate, is also close to Modi and his government. But unlike Adani, Ambani — and his father before him — had relationships with political leaders from many factions among many parties. Adani is much more closely affiliated with Modi’s success in particular.


Adani was an early supporter of Modi’s “Vibrant Gujarat” campaign, which established him as a champion of economic growth after his image as the state’s leader was damaged by the Hindu-Muslim riots of 2002. After winning power in the national elections of 2014, Modi flew to Delhi on Adani’s private jet.


Critics have complained that Adani’s businesses have enjoyed unfair favor under Modi’s administration. Adani has pointed out that he does business everywhere in the country, even in states where Modi’s party is out of office. But the leader of the government of one of those states, Kerala, said that Modi and Adani were taking over its airport to “create a special monopoly in this sector according to their interest.”


Many investors in India were familiar with allegations made by Hindenburg, at least as rumors. Some institutional investors, both in the United States and in India, have been wary of Adani Group companies’ shares, some of which trade at extraordinarily high valuations relative to their earnings.


But India is one of world’s the fastest-growing large economies, and Modi retains a tight grip on political power. Even after this week’s market plunge, Adani’s conglomerate is worth far more than it was just a few years ago.


This article originally appeared in The New York Times.


SHARE ARTICLE
arrow up
home icon