The Adani affair and implications for Modi regime

The Adani Group’s stock price has fallen off a cliff after a report from the U.S. short-seller Hindenburg Research accused the group of questionable practices, including stock manipulation. The group’s cumulative market losses have topped $110 billion, sparking fears of broader financial contagion in India. The allegations have also put Modi’s credibility, particularly, at stake, as he is known to have close ties with Gautam Adani.


The Adani Group, one of India’s most notable corporate success stories, was recently the subject of a report by Hindenburg Research, a company specializing in identifying and shorting the stocks of businesses that it thinks have questionable practices. The company charged the Adani Group for conducting “brazen stock manipulation and accounting fraud” including questionable use of tax havens.

By February 6, the listed businesses of the tycoon had lost more than $110 billion in value, and a prospective $2.5bn share sale that was due to happen for Adani Enterprises was canceled post subscription. Adani, who was last year declared as the world’s third richest man has dropped to 18th position on Forbes’ list of billionaires after losing $64 bn so far after the Adani group companies’ share price collapses. Just as important and beyond the future of the billionaire and his business empire, India’s reputation for good corporate governance and its pursuit of a development model is at stake.

Read more: A US corporate scourge deflates the empire of Indian tycoon Adani

The Adani Group began as a partnership engaged in commodity trading in Gujarat and went public as Adani Exports in 1994. A significant portion of its earnings came from the operation of a nearby port in Mundra given through a government contract, and it later entered the edible oil industry.

Regionally focused at first, the group’s interests have since grown to include other enterprises all over India. Even though each of these enterprises is run independently as different Adani enterprises, the businesses are all connected via a holding company called Adani Enterprises. It is also commonly acknowledged that the group’s proximity to political influence is one of its competitive advantages. In South Asian businesses, claiming that the company profits from its political connections are not unusual.

An embarrassing situation for Modi

The Adani Group is trying to frame the report as anti-Indian, calling it “not merely an unwarranted attack on any specific company but a calculated attack on India, the independence, integrity, and quality of Indian institutions, and the growth story and ambition of India.” But, Modi has seen an uproar in the Indian parliament, with the opposition parties asking the government to investigate the company’s affairs.

What makes matters worse is that India’s Securities and Exchange Board of India (SEBI), which has to investigate such issues and conduct overall supervision of companies on the stock exchange, has a key official related to Adani. Cyril Shroff, who serves on SEBI’s Committee on Corporate Governance & Insider Trading, is related to Gautam Adani. Shroff’s daughter Paridhi is married to Adani’s son Karan.

Read more: Adani’s shares dive again amid opposition protest

If Hindenburg Research claims are confirmed, it would be embarrassing for Modi, who has a history of ties with Adani. Adani and Modi are natives of Gujarat, where the latter was elected chief minister in 2001. Adani emerged as one of Modi’s most significant supporters from the business community, as he established a regional industrial hegemony that aided the future prime minister in pitching Gujarat as an example of an Indian economy. When Modi traveled on an Adani plane after winning the 2014 presidential election, it symbolized how close they were.

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