In 2022, the Indian businessman was the third richest man in the world but a short report at the start of 2023 saw the value of his listed companies fall by over $100bn. The fallout has spread beyond the markets and into politics as the story of Adani has become inextricably linked to Prime Minister Narendra Modi's vision of the new India
Produced and directed by Tom Griggs. Filmed by Petros Gioumpasis in London, Gregory Bobillot in New York, Abhilash Kalathi in Bangalore. Edited by Alex Langworthy. Extra footage by Getty, Reuters, Bloomberg and ANIThe story of Adani is the story of the world's third-richest man being cut down to size by a short-seller group on the other side of the world.The Adani scandal is a wake-up call to the Indian government that we need a complete overhaul of our regulatory system.
He has paid back his debt on his personal shareholding which he had borrowed, about $2.5bn. Nobody in this country has a concern about the ability to repay debt. There does seem to be a very, very nice parallel between the rise of Narendra Modi and the rise of Gautam Adani. And the rumours that he's close to them are not new rumours. They've been around for 20 years.
I think Mr Adani would like the perception to remain that he is very close to Mr Modi. Now, how close he is to Mr Modi is only a question that Mr Modi could answer. Yes, it does help to be a big entrepreneur, because in relation to land allotment and local licencing, government steps on the plate. But they do it for everybody.
Adani has been building infrastructure projects in neighbouring countries, including Bangladesh and Sri Lanka. Adani Power is India's largest private thermal power producer, and Adani Enterprises is the flagship company which houses Adani's mining and coal trading operations. You know, the Adani business model is the same business model that is followed by many promoters in India. It's a business model which says we get into those industries where there is a regulatory framework, where the government matters, where the politician who is in charge of the government matters.
Before the Hindenburg rport, there were clearly overvalued compared to equivalent companies in their sectors. Clearly. Journalists and investors were starting to ask some questions about the valuations. There were also questions about Adani's extensive use of offshore vehicles, and of the presence in its shareholder base of a lot of investors that were funds that appeared to be only holding Adani stock. But nobody could quite put it all together. And, in part, this was because Adani has a track record of going after critics, of taking legal action against journalists.
There are two main allegations made by Hindenburg, one of which is stock market manipulation. And the other one is accounting fraud. There were all these offshore entities, a lot of which were registered in jurisdictions like Mauritius or Singapore, which only seemed to invest in Adani shares. The report is a malicious combination of selective misinformation, stale, baseless, and discredited allegations that have been tested and rejected by India's highest courts.
At one point, Rahul Gandhi, who's the most prominent figure in the opposition Congress party, stood up and gave a speech questioning all of Adani's foreign deals. He also held up pictures showing Adani and Modi sitting together on Adani's jet. It's very telling that all of his remarks in the speech relating to alleged ties between Adani and the prime minister were expunged from the parliamentary record.
I think the opposition was always aware of just how this government was helping its friends and their allies. But given that the BJP government came to power in India on an anti-crony capitalism wicket, for them to be embroiled in a scandal that was so obviously crony capitalistic, and that too for just one man, I think that's... all the ingredients were in for this very exciting political, financial potboiler.
Hindenburg could have bet against Adani through India's main stock index, the NIFTY 50, in which Adani companies are constituents. It would have been able to use a derivative called a"single stock future" that would allow the firm to have a weighted exposure to the group through the Singapore exchange. To do this, it would need Singapore-based banks to act as counterparties.
And some people say because he's a short-seller you should not trust him. I say, because he's a short-seller, I trust him more. Why? They are putting their money where their mouth is. Probably what is so distinctive about Adani is not that he engaged in these practises, that's normal in India for most promoters, but that he did it to this level where the free float was so small, where his own ownership of the stock was so high.
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