A month after the release of the explosive Hindenburg report and the shock waves continue. The report has caused a firestorm in the Indian Parliament. The country’s Supreme Court has been deluged with cases arising from the Hindenburg allegations. Several major Adani projects have been cancelled or shelved as speculation mounts about the group’s financial health. Allegations swirl in the international press about the role of Vinod Adani, the older brother of Group founder, Gautam, in a network of Adani-invested entities registered in tax havens. Fears are now openly expressed in the world’s financial press that funds invested in ‘green’ Adani companies may have been used to back new coal projects. And the stock-market rout continues, with up to 80% of value having been wiped off some of Adani’s publicly-listed companies since Hindenburg hit the airwaves.
A month on from the release of the explosive report on the Adani Group by US-based short-selling firm Hindenburg Research, and the scandal was still causing a furore in India’s Parliament. Opposition parties are now questioning Prime Minister Narendra Modi over his relationship with Adani on a daily basis, with no pertinent response from the government so far. Multiple cases have been filed at India’s Supreme Court, calling for the court to order investigations into Hindenburg’s allegations.
In the stock markets, a rout in share prices of the Adani Group has continued, with over US $146 billion wiped off their value. Deals involving the group’s companies have broken down, been shelved, or are facing increased scrutiny in India and around the world. There are signs that the group is under financial pressure, with doubts expressed over the accuracy of its claimed assets in cash or cash equivalents. Investors have pulled their funds from group enterprises due to concerns over its environmental record.
Rahul Gandhi leads the charge in Parliament
Rahul Gandhi, the most prominent leader of the opposition Congress Party, led the charge in Parliament. Speaking during the budget session on 7 February, Gandhi focused much of his 50-minute speech on Modi’s relationship with Adani. Showing photographs of Modi and Adani together, he repeatedly alleged that the Modi government had facilitated the growth of the Adani Group – bending rules in its favour, unleashing investigation agencies against its business rivals, and coercing foreign governments into giving it large contracts.
Gandhi’s remarks caused a furore on the treasury benches. Government ministers demanded that his remarks be expunged from the Parliament’s record. The Speaker of the lower house of Parliament, the Lok Sabha, obliged. Modi, meanwhile, completely ignored the entire subject and avoided mentioning the word Adani altogether, in his own speech to Parliament the following day.
Mahua Moitra, an outspoken member of the opposition Trinamool Congress party, also delivered a speech on 7 February that focused on the Adani scandal. She claimed that Adani had hoodwinked Modi and the government into helping his business along its path of rapid expansion.
Following the end of the Parliament session, the opposition parties continued the battle outside the house. From 6 to 21 February, the Congress party issued daily statements, asking three questions at a time to Modi about the Adani scandal. The campaign, which the party titled ‘Hum Adanike Hain Kaun’ (who am I to Adani – a riff on the title of 1994 Bollywood blockbuster Hum Aapke Hain Kaun – or who am I to you), draws on a major event in Indian political history. In the late 1980s, the Congress party itself, then in government, faced daily questions from the opposition and the media on its involvement in a row over a weapons-procurement contract with Swedish company Bofors. That episode, in which then Prime Minister, the late Rajiv Gandhi (Rahul’s father) was implicated, was one of India’s biggest ever corruption scandals, and ended up taking down that government, and has remained a talking point to this day.
Congress temporarily suspended its daily questions on the Adani scandal on 23 February as the party gathered for an annual plenary meeting, saying that the questions would resume on 27 February.
Meanwhile, a linked controversy has erupted around remarks made by Congress leader Pawan Khera at a press conference in Delhi. While demanding an investigation by a joint parliamentary committee into the Adani scandal, Khera referred to Modi as ‘Narendra Gautamdas Modi’. Modi’s middle name is Damodardas, deriving from his father’s name Damodardas Mulchand Modi, following a naming convention in his community where a son takes his father’s first name as his middle name. Khera’s appellation replaced Damodardas with Gautamdas in an apparent reference to Adani Group chairman Gautam Adani. The jibe provoked a furious reaction from Modi’s BJP party.
Criminal cases were registered against Khera by police in two BJP ruled states. The charges include criminal conspiracy, promoting enmity on the grounds of religion, race, or place of birth, defamation, intentional insult with intent to provoke breach of the peace, and statements conducive to public mischief. On 23 February, as Khera was accompanying other Congress leaders on a flight from Delhi to Raipur to attend the Congress’s plenary meeting, he was deplaned on the tarmac and arrested by police from the north-eastern state of Assam. Khera applied to the Supreme Court and was granted interim bail on the same day.
This was an extraordinarily intemperate example of the hypersensitivity of PM Modi and his party to jibes about their relationship with the tycoon who, until a month ago, was Asia’s richest man.
At the Supreme Court
The Adani scandal has found its way to India’s Supreme Court via other routes as well. While one petition seeks prosecution of Hindenburg Research and its founder Nathan Anderson, others ask the court to initiate inquiries into Hindenburg’s allegations. Yet another petition asks for a probe into the role of public-sector financial institutions such as the Life Insurance Corporation and the State Bank of India in supporting the Adani group through large investments and loans.
A three-judge bench led by Chief Justice of India D. Y. Chandrachud has been considering these linked petitions together.
The government’s response to the court consisted of attempting to resort to ‘sealed cover jurisprudence’. This is a practice that the Modi government has increasingly resorted to in politically inconvenient cases, where it submits arguments and information in sealed covers to the judges, making the contents secret both from the eyes of the public and from their opponents in court.
When the Supreme Court bench said it intended to set up an expert committee to look into the Hindenburg allegations and the issues arising out of them, the government said it would submit to the court a proposed list of names and a proposed remit for the committee to the court in a sealed cover. On 17 February, the court rejected this plea, saying that for the sake of public confidence and transparency, it would not entertain any sealed-cover submissions in this case, and that it would appoint the committee on its own.
The court will soon release its order, announcing the names of the committee members and the remit of its probe. Meanwhile, on 25 February, the court rejected a petition by one of the four petitioners in the case seeking a gag-order on media reportage about the Hindenburg allegations.
It is worth mentioning that the expert-committee route has aroused skepticism among some commentators in India. In another recent politically significant case, concerning allegations made by an international consortium of news organizations that the Indian government had made use of the Pegasus software suite to hack into the phones of hundreds of Indian journalists, activists, opposition politicians, bureaucrats and judges, the Supreme Court adopted a similar method. Instead of directly ruling on petitions by affected parties (including former AdaniWatch contributor Paranjoy Guha Thakurta, whose phone was proved to be hacked into by a forensic investigation), it appointed an expert committee. After its investigation, the committee told the court that it did not find evidence of phone hacking or of the government having used Pegasus, and the matter was effectively closed.
Media Reports on Vinod Adani
One of the key allegations in the Hindenburg report was that certain companies in tax havens around the world have invested almost exclusively in Adani Group stocks. These companies are alleged to be linked to or ultimately controlled by Vinod Adani, the elder brother of Gautam Adani. These investments, the report alleged, violate Indian securities law, as they are being made by a ‘related party’, thereby reducing the number of shares not held by company insiders to below the statutory minimum of 25%. Trading of shares between these tax-haven entities is alleged to cause stock-price manipulation by artificially pumping up the valuation of the group’s listed companies.
In its rebuttal to the report, the Adani Group denied that Vinod Adani is a ‘related party’ (despite being the brother of the group’s founder), asserting that he has no link to the group. Independent media reports have subsequently focused particular scrutiny on Vinod Adani’s role.
First, the Wall Street Journal independently corroborated some of Hindenburg’s claims. It found a Vinod Adani link to a Mauritius based entity named Trustlink International that incorporated two other Mauritius entities named Opal Investment and Krunal Trade & Investment. Vinod Adani is listed as a board member for Krunal. Opal is one of the largest shareholders of Adani Power.
Bloomberg found that Vinod Adani and his wife Ranjanben Adani are listed as the ultimate beneficiary owners of Endeavour Trade and Investment, a Mauritius-based entity which was used by the Adani Group in its acquisition of the cement manufacturers Ambuja Cements and ACC from Switzerland’s Holcim. Bloomberg’s report also said that Vinod Adani spends ‘two or three hours’ daily in the Dubai office of group company Adani Global FZE.
Then, a feature story by Forbes revealed previously unreported transactions involving offshore funds with ties to Vinod Adani that ‘appear designed to benefit the Adani Group’. It found that a Singapore company indirectly controlled by Vinod Adani, named Pinnacle Trade and Investment PTE, had entered into a loan agreement in 2020 with Russia’s state-owned VT Bank. Pinnacle had borrowed US $263 million from VTB by April 2021, and loaned US $258 million to an unnamed related party, the report said. Pinnacle used two Mauritius-based investment funds – Afro Asia Trade and Investments Limited and Worldwide Emerging Market Holding Limited – as guarantors of the loan, the report said. Both these entities are large Adani Group shareholders, with holdings in Adani Enterprises, Adani Ports and Adani Power.
A very interesting story came from an unexpected media outlet. The Signpost, a monthly online newspaper produced by the Wikipedia community reported that Wikipedia had discovered a systematic effort by Adani-linked accounts, including some run by Adani employees, to manipulate information about the group on Wikipedia. It said ‘over 40… sockpuppets or undeclared paid editors…tr[ied] to con Wikipedia readers with non-neutral PR versions of [Adani Group] related Wikipedia articles’. Many of them ‘edited several…articles and added non-neutral material or puffery’.
Adani projects cancelled or shelved
The Hindenburg waves have spread from India to international corporate circles.
The first casualty of the Hindenburg report was a US $2.5-billion share offering by flagship firm Adani Enterprises Limited. It was scrapped a day after Adani claimed it had been ‘over-subscribed’.
On 8 February, the French company Total, Adani’s partner in the group company Adani Total Gas Limited, announced that it has put on hold a planned investment to take a 25% equity stake in the Adani group’s US $50-billion green hydrogen project. Total’s CEO was quoted saying ‘it makes no sense to add more (projects) until there is clarity. Adani has to explain the allegations’. The investment had been agreed upon in June 2022, but no contract had yet been signed.
On 16 February, Adani Power announced that it had called off a US $850-million deal to acquire a coal-power company named DB Power. Put together in August 2022, the arrangement expired on 15 February with no transaction in place. Adani Power did not explain why it had allowed the agreement to lapse and the sale to fall through.
On the same day, Adani Green told analysts in an earnings call that it has put a $1.2 billion worth of capital expenditure under review.
‘Short-term capex (12-18 months) is being reviewed,’ the company management said, according to the Business Standard. ‘In the near term, there will be a slowdown in our target. We will revisit our discretionary capex and reduce our capex in the near term.’
Then on 22 February, Orient Cement announced that it had terminated a non-binding agreement with an Adani Group company signed in September 2021 to set up a cement-grinding unit at one of its facilities. The Adani Group had requested that Orient Cement not pursue the venture, Orient said.
Adani’s deal to export power to Bangladesh from its thermal power plant at Godda, meanwhile, has been the subject of massive media attention in Bangladesh and will be the subject of a forthcoming AdaniWatch story. Earlier Bangladesh had sought a reduction in coal-import prices that Adani was seeking to pass on. Then, after the publication of an AdaniWatch story questioning whether the deal between Adani and Bangladesh should be legally voided, multiple voices in Bangladesh have called for that country’s government to walk away from the deal altogether.
On 24 February, Indian media reported that Prothom Alo, a Bangla language newspaper in Bangladesh, had reported that Adani Power had ‘promised to supply electricity to Bangladesh at a reduced price keeping consistent with the generation cost in the country’s existing coal-fired plants’. An Adani official was quoted as saying ‘Adani will import coal for its plants at the same price the Bangladesh coal-run plants do for themselves’. If that occurs, then Adani will have taken a big hit in the price it charges for power generated at Godda.
Is Adani in financial trouble?
Predictions that the Adani Group would find it harder to raise capital after its share-price crashes appear to have been born out.
On 9 February, the Financial Times reported that the Adani Group was facing a margin call from international lenders for a loan of US $1.1 billion. Lenders, including Barclays, Citigroup, Deutsche Bank, JPMorgan and Japan’s SMBC Group, had requested that Adani pledge additional shares worth more than US $500 million as collateral for the loan over and above those already pledged. In response, Adani paid back the entire $1.1 billion loan in order to avoid having to pledge more shares. How the Group raked together these funds has been a matter of speculation.
Then on 12 February, three Adani companies pledged additional shares to the State Bank of India as collateral towards a US $300-million letter of credit issued by the bank to Adani’s Carmichael mine in Australia.
The scenario in the bond market is no better. On 5 February, Adani Enterprises was reported to have dropped a plan to raise about $120 million through an issue of public bonds. After the share offering was called off, Adani bonds fell to ‘distressed’ levels. Adani bonds are teetering at the edge of ‘junk’ ratings, with agencies S&P Global and Fitch both currently rating Adani bonds at BBB-, which is the last rung that is considered ‘investment grade’. Standard Chartered, Credit Suisse and Citibank have all announced that they will no longer accept Adani dollar bonds as securities against loans.
Another indicator of stressed finances arrived as Bloomberg reported on 9 February that the Adani Group is offering shipments of coal at a discount to raise quick cash. The report said that the group’s traders are offering to sell several coal shipments from Australia and Indonesia at discounts of about 4% relative to Asia’s price benchmark.
On 20 February Livemint reported that the Adani Group had revised its definition of ‘cash equivalents’ to enhance its statements of liquidity. The report said that the group had included security money put up against bank guarantees as well as non-current investments as cash equivalents in recent filings to stock exchanges. This redefinition is inconsistent with Indian accounting standards, the report said, where cash equivalents are defined as investments maturing within three months. By including non-current investments and security deposits held by banks, the Adani Group has been described as seeking to inflate cash-on-hand on its books, the report suggested.
Environmental and social worries
The Hindenburg scandal has raised concerns about Adani’s ESG, or ‘environment, social and governance’ issues. On 13 February Bloomberg reported that more than 500 European Union registered ESG funds are invested in Adani Group companies. A few days later Bloomberg reported further that financing arrangements across the Adani group have ‘sent a fresh chill through ESG markets’.
It said that a public filing had made it clear that Adani is using stock from its renewable energy business, Adani Green Energy Limited, as collateral in a credit facility that is helping to finance the Carmichael coal mine in Queensland.
Norway’s largest pension fund, KLP, immediately divested its entire shareholding in Adani Green, concerned that it might have inadvertently helped fund coal mining. KLP has ‘blacklisted’ coal, and so any indirect financing of coal mining would represent a breach of its commitments.
Danish business daily Børsen reported that Adani Group companies are a part of most of the sustainable investments at the Danish bank, and that it is now coming under intense scrutiny from Danish asset managers. It noted that seven Danish pension funds and the Dankse Bank – Denmark’s largest bank – together have investments worth at least 100 million Danish kroner (US $14 million) in Adani Green, and over 300 million kroner (US $42 million) in the Adani Group as a whole.
The Scottish news website The Ferret reported that Abrdn, an Edinburgh investment company, holds £50m worth of Adani bonds. The report noted that the company markets itself as sustainable and sponsors major cultural events in Scotland and quoted environmental campaigners calling for it to divest from the Adani Group.
On 17 February, Livemint reported that Morgan Stanley Capital International or MSCI, one of the world’s most prominent ESG index providers, said it would accelerate its review of companies after it failed to address allegations of poor governance in Adani companies as fast as its competitors had. Earlier, S&P had removed Adani Enterprises from its Dow Jones Sustainability indices.
Stock market rout continues
The stock market rout in the Adani group’s ten listed companies has continued largely unabated.
By our calculations, in the month since the release of the Hindenburg report on 24 January, the Group’s shares have lost a combined 61.72 percent in value, wiping out about 12.1 trillion rupees or US $146 billion in value. (See chart below for details.)
Valued at US $231 billion prior to the report’s release, the Adani Group’s listed entities now are worth about US $86 billion. The biggest loser has been Adani Total Gas Limited, its gas distribution company, a joint venture with France’s Total, which has lost US $41.6 billion in value – a staggering 80%. Adani Enterprises, Adani Transmission and Adani Green Energy follow have each lost between $19-20 billion in value.
Gautam Adani’s personal net worth has fallen by $79 billion, according to the Bloomberg Billionaires Index, on which he is currently ranked 29th richest in the world. Prior to the report, he ranked third, with a net worth of over US $120 billion.
Share Price 52-week high (Rs)
Share Price on 23 January (Rs)
Share Price on 24 February (Rs)
Percentage Fall Since 23 January
Adani Green Energy
Adani Ports and SEZ
Adani Total Gas
Share prices as on close of trade on 24 February on the BSE (Bombay Stock Exchange)
Market Capitalization on 23 January (Rs)
Market Capitalization on 24 February (Rs)
Fall in Market Capitalization Since 23 January (Rs)
Adani Green Energy
Adani Ports and SEZ
Adani Total Gas
The continuing rout has caused headaches internationally about the health of investments made by institutional investors.
In India, the market value of the state-owned Life Insurance Corporation’s investment in Adani Group shares fell below their purchase value for the first time on 23 February, reported the Indian Express. This public-sector insurance giant is the largest domestic institutional investor in the Adani Group.
In Australia meanwhile, The Guardian reported that ‘tens of millions’ of Australian retirement savings have been ‘left exposed’ Adani’s meltdown. It listed the Future Fund, the Australian Retirement Trust, Group Super and Brighter Super as among major Australian funds exposed to the Adani Group’s losses.
The Hindenburg report had said that it expected an ‘85% downside’ in Adani company share prices, suggesting that there may be room for them to fall still further.
A Business Standard report, based on technical analysis of share-price movements, predicted that further declines in the share prices are likely. It identified Adani Enterprises, Adani Transmission, Adani Ports and Adani Power as the companies likely to see further slides in value.
While there are worries in India over whether any meaningful outcomes will result from the investigations of regulatory bodies and the Supreme Court, global markets have already cast their verdicts.
The author is an independent journalist.