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The fast fall in fortune of India’s coal tycoon Gautam Adani

The third-richest man in the world’s net worth halved in a week after he was accused of market manipulation by a US firm specializing in ‘man-made disasters’

Indian billionaire Gautam Adani, during the ceremony that followed his group's purchase of the Israeli port of Haifa on Tuesday.
Indian billionaire Gautam Adani, during the ceremony that followed his group's purchase of the Israeli port of Haifa on Tuesday.AMIR COHEN (REUTERS)

Having an Indian billionaire become the richest person in the world would have been a feather in the Asian nation’s cap. It would have underscored the thrust of an emerging power on the same year that India will surpass China as the world’s most populated country, with more than 1.4 billion inhabitants. Gautam Adani was a serious candidate to be that person. He only had the Frenchman Bernard Arnault, owner of LVMH, and the American Elon Musk, founder of Tesla and owner of Twitter, ahead of him. But that was a few days ago.

On January 24, a New York-based short-selling firm named Hindenburg Research published an explosive report of over 100 pages accusing the Adani Group conglomerate of committing accounting fraud for decades and manipulating the market prices of its listed subsidiaries, especially seven companies whose value grew 819% in just three years. Adani Group’s businesses include, among many other assets, ports, coal mines, food companies, airports, data centers and power plants.

The scandal has caused an investor stampede, lowered the group’s stock market value by more than $100 billion, and deflated the Indian businessman’s fortune in record time. He is no longer the richest man in Asia, not even in India. And he has dropped to 17th place on Forbes’ list of the richest people on the planet. On Thursday, Forbes estimated his net worth at $64.2 billion, practically half of what it was a week ago.

Denying the accusations has done nothing for Adani, a man with connections to power in his country through his long friendship with India’s prime minister, the nationalist Narendra Modi. In his reply to Hindenburg’s report (even longer at 413 pages), he describes what happened as a “calculated attack against India.” And he does not hide his contempt for those who accuse him, whom he calls “the Madoffs of Manhattan” in reference to the infamous Wall Street swindler. The short-selling company issued its own reply, rejecting the claims and saying that “the Adani Group has attempted to conflate its meteoric rise and the wealth of its Chairman, Gautam Adani, with the success of India itself.”

Looking for man-made disasters

Hindenburg Research’s intentions are not altruistic. The company takes its name from the German airship that went up in flames in 1937, killing 36 people. “We look for similar man-made disasters floating around in the market and aim to shed light on them before they lure in more unsuspecting victims,” the company says on its website.

But behind the two-year investigation to unmask Adani and the dozens of interviews that appear in the report, there is also an economic objective: in its report, Hindenburg said that it had taken a “short position in Adani Group Companies” through bonds that trade in the US and other investments that trade outside India. A “short” trade is a way for someone to make money if an investment’s price falls. If the price of a company’s stock or bonds falls because of the negative attention from the report, Hindenburg can profit. This does not necessarily mean that they lie to achieve it, because such a move could end up backfiring on them.

Hindenburg’s biggest triumph came in 2020 when it took on the electric vehicle manufacturer and energy company Nikola Corporation, although Hindenburg officials did not reveal the amount they made. Now, their new and succulent prey is the Indian tycoon. Hindenburg does not believe that the spectacular increase in his fortune, which went from $8.9 billion in 2019 to more than $120 billion recently, has been lawful. And the timing of the report could not have been worse for Adani, who was busy raising $2.4 billion from investors who have pulled out after learning of the claims.

Shares in Adani Enterprises fell as much as 30%, to 1,017 rupees ($12) Friday before recovering to trade about 15% lower. The company’s share price has plunged by about 66% since Hindenburg released its report last week, when it stood at 3,436 rupees ($41). Stock in six other Adani-listed companies were down 5% to 10% on Friday.

The blow is not just being felt by Adani Group’s owner and its shareholders – large and small, spread throughout the world. The report also questions the credibility of India’s system, which, if the accusations are confirmed, did not have the necessary checks in place to stop the businessman’s market manipulation. The outcome of the Adani case will be widely followed by investors.

Meanwhile, the entrepreneur is carrying on with his corporate agenda, trying to convey normality in the midst of the storm. This week he went to Haifa (Israel) to participate in an event marking the purchase of the city’s port by the Adani Group. In May of last year, the group also bought the Indian cement subsidiary of the Swiss group Holcim for $10.5 billion. The group is also close to becoming the largest shareholder in New Delhi Television (NDTV) after launching a hostile takeover bid for a TV channel that has been critical of the Indian prime minister.

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