In the city’s stock market, however, Adani’s wealth, which has increased by more than $100bn in less than a decade, was eroding faster than the paint on the slogan could dry. Adani’s self-named conglomerate grew by running a rapidly increasing share of India’s public infrastructure including ports, airports, power plants and coal mines.

However, a recent report by the New York-based activist short-seller Hindenburg Research showed a vast array of offshore entities with ties to the Adani group, which it indicated may have been used to inflate profits, hide losses or blur ownership. The report, titled Adani Group: How The World’s 3rd Richest Man Is Pulling The Largest Con In Corporate History, said the group was involved in “brazen stock manipulation and accounting fraud”.

The report, which came out on January 24, hit India and stocks of the group’s listed companies like a bombshell, even as they retraced several older trails of regulators’ inquiries that had gone nowhere. The ensuing days wiped more than $110bn of market value off the group’s listed firms and halved Adani’s net worth.

Hindenburg’s report came just as the 200 billion rupees ($2.5bn) follow-on public offer of Adani group’s flagship Adani Enterprises was to open on the Bombay Stock Exchange. The group hit back at the report on the day of the public offer opening, January 27, saying it was an “attack on India”. It put out a 432-page response and scrambled to get the public offering subscribed.

But stock prices for group companies continued to fall and Adani Enterprises said it would scrap the offering, even though it had been fully subscribed and the money returned to investors.

The damage from the report has extended far beyond the Adani group. Its allegations of regulatory failings and questionable corporate governance have been ill-timed for India as it seeks the global centre stage. It recently overtook the United Kingdom as the world’s fifth-largest economy and China as the world’s most populous country. This year, it holds the G20 presidency.

“Investors do worry about the risk of contagion,” says Charlie Robertson, chief economist of Renaissance Capital, an emerging markets investment bank. “That if there is one company like this, could we find more?

In China, for instance, investors kept investing in real estate companies after Evergrande but later, several other companies turned out to be problematic too,” he said referring to the giant Chinese real estate firm that nearly buckled under enormous debt in the last couple of years, with the risk spilling over to several other real estate firms.

While the scale of the conglomerate owned by Adani, whose meteoric rise to being the world’s third-richest person, can be matched by only a few other companies, the episode has left Indian regulators with a lot to answer.

“This questions the credibility of Indian regulators, just as Wirecard was for German regulators,” says Tim Buckley, director at the Australian think tank Climate Energy Finance, who has tracked the Adani group’s various businesses for many years. Germany’s finance watchdog was heavily criticised for ignoring early warnings about Wirecard, the digital payments firm that was once the darling of the stock markets but blew up in an accounting scandal in 2020.

Adani’s rise

The 60-year-old Gautam Adani is known for being personally modest as much as for his dazzling ambition and success. After a short stint as a trader in Mumbai’s diamond market, still in his twenties, he returned to his home state of Gujarat and began dabbling in business.

In 2002, months after now Prime Minister Narendra Modi became Gujarat’s chief minister, religious riots broke out in the state, with questions arising over Modi’s and the police’s role in the unrest. Soon after, Modi began hosting large global investor conferences, seeking to burnish his state’s image – and his own – with an investor-friendly shine.

With Adani handling the state’s largest port and several other infrastructure projects, the chief minister became known for getting things done.

But even as his fortunes rose, Adani had some close personal shaves. He had been staying in Mumbai’s Taj Mahal Palace hotel when armed men attacked it in 2008. Adani narrowly escaped as the attackers battled the Indian police for days, killing residents and staff before being killed themselves.

Years earlier, Adani had also briefly been kidnapped for ransom before escaping – events that may have encouraged him to keep a low profile. He recently admitted to spending most evenings at his home in Ahmedabad, playing cards with his wife, a trained dentist who now runs the group’s charitable work.

Adani is one of seven siblings, several of whom work in the group, as do both his sons Karan and Jeet. Karan is the chief executive of Adani Ports and SEZ and was recently appointed to Maharashtra state’s economic advisory board.

When Modi became prime minister in 2014, he arrived in New Delhi on Adani’s plane. Since then, Adani has expanded successfully into airports, renewable energy, data centres, defence production and real estate among other sectors. Many of the contracts for such infrastructure projects were won through a competitive bidding process.

“India does not seem to be interested in developing a range of regional infrastructure players,” says Rohit Chandra, assistant professor of public policy at IIT Delhi. “This quest for national champions comes at the cost of regional contractors growing and climbing the ladder of project complexity.”

The crisis

Since 2020, until the Hindenburg report, some Adani group stocks had risen to more than 400 times its per share price. It suggested either that shareholders expected earnings to rise sharply or that the share was trading at a price that was too high. Around then, questions began to swirl about the group’s ownership.

While the Adani family owned stakes to as high a threshold as regulators permitted, the report showed that offshore funds – including in Mauritius, Cyprus and the UK – seemed to also own substantial shares in the group’s companies. Elara, Vespera, Cresta, New Leaina, LTS , APMS, Albula, Asia Investment Corporation and Opal among other such funds had few, if any, other investments.

Hindenburg’s analysis showed that much of the funds of these companies were deployed in Adani stocks, suggesting they may be shell companies. The report traced connections between Gautam Adani’s UAE-based brother, Vinod Adani and several of them.

“When you see such a complex network of offshores companies from a company whose operations are mostly in India, the onus is on the company to say why they exist,” said Climate Energy Finance’s Buckley.

The Hindenburg report alleged these funds accounted for up to 47 percent of the volume in Adani group stocks on some days and were possibly used to drive up stock prices.

“Many of the Vinod Adani-associated entities have no obvious signs of operations, including no reported employees, no independent addresses or phone numbers and no meaningful online presence,” the report said. “Despite this, they have collectively moved billions of dollars into Indian Adani publicly listed and private entities, often without required disclosure.”

In its public statement, the Adani group said Vinod was not a related party since he did not hold any official positions in the group. A group spokesperson did not respond to an emailed request for comment.

The recent prospectus for Adani Enterprises’s public offering says the country’s stock market regulator, the Securities and Exchange Board of India, had asked the group’s publicly-listed companies for ownership and director details in November 2020, and that the companies had provided these details.

In parliament too, the government said such an investigation was under way but the findings, if any, have not been made public.

Fallout for Adani Group

The stock price of Adani Enterprises fell from 3,442 rupees ($41.5) on January 24, when the Hindenburg report came out, to 1,562 rupees ($18.8) within days before recovering to 1,983 rupees ($23.9) on February 8 as the company tried to soothe investor confidence by prepaying more than $1.1bn in bonds. It also announced that some of its pledged shares had been released.

But by then, Credit Suisse, Citigroup and Standard Chartered banks had stopped accepting Adani bonds as collateral and ratings agency S&P had downgraded Adani Ports and Adani Electricity to negative.

The downgrade came due to “governance risks and funding challenges for the larger Adani group”, the report said. S&P also removed Adani Enterprises from its Dow Jones Sustainability Indices, raising challenges in getting green funding, a key to its planned move from coal to renewable energy.

The company has faced sustained campaigns by environmental activists against its coal mining projects in India and Australia. They now cite the Hindenburg report to say the related party transactions indicate the walls between its renewable and coal businesses may not be strong enough.

In 2021, the Adani group shifted ownership of the Bowen Rail Company, the coal haulage component of the Adani Carmichael thermal coal project, from Adani Ports to Adani Enterprises “to fulfil Carbon Neutral Commitments”, said Will Van De Pol, a campaigner for Market Forces, an Australian group that lobbies banks to make green investments.

“Asset transfers are being used to obscure connections to the company’s coal expansion plans, highlighting the need for investors to steer clear of the entire Adani group.”

Fallout for regulators

The Adani crisis and its fallout on regulatory agencies and the government is being debated in the Indian parliament. Opposition parties have called for a parliamentary investigation into the group. Investors, too, say it is needed to restore confidence.

“We would like to see a credible investigation by Indian authorities. That is the best way to put Indian and international investor concerns to rest,” says Renaissance Capital’s Charlie Robertson.

So far, the government has not announced new investigations into Adani group stocks and holdings. In a speech in parliament on Wednesday, Modi said that “the 2030s would be India’s decade”, but hardly addressed the Adani stock crash.

“The regulator has to do its own homework and then take action and not just react based on social media,” said JN Gupta, managing director of Stakeholder Empowerment Services, an adviser on corporate governance.

An investigation could also bolster the government’s efforts, through its G20 presidency and outside, to attract both foreign direct investment and investment in its markets.

With China having undergone long COVID lockdowns and a trade war with the United States, India seemed an increasingly attractive destination. A day before the Hindenburg report was released, India’s commerce minister Piyush Goyal said Apple was planning to increase its manufacturing in India, aiming to make up to 25 percent of its phones in the nation, up from the current 5 percent.

But Renaissance Capital’s Robertson says: “Three months ago, there was a lot of investment coming into India and China was looking risky. Today that has changed.”

In India itself, one likely impact of the report could be the slowing down of the slew of infrastructure projects the Adani group has contracts for.

“Delaying, discarding, and rebidding projects are part of the infrastructure development process in most developing countries,” says IIT Delhi’s Chandra.  “It is quite likely that the Adani group will consolidate, reprioritise and possibly scale back some of its project ambitions after its losses in the last few weeks.”

That could be the delaying of the Indian dream itself.