Nicholas Spiro

Macroscope | 4 reasons Adani Group scandal isn’t enough to turn investors bearish on India

A recent report has put Adani Group’s debt-fuelled acquisition spree and its corporate governance under scrutiny while embarrassing the Indian government

But the scandal’s impact has been muted, thanks to Adani’s infrastructure empire, the allure of India’s growth story and investors’ tolerance of imperfect governance

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Commercial vehicles drive past signs for Adani Port in Mundra, Gujarat, India on February 8. The impact of Adani Group’s woes on overall sentiment has been fairly muted. Photo: Bloomberg

Nicholas Spiro

Published: 3:45pm, 23 Feb 2023Updated: 3:47pm, 23 Feb 2023

In its rebuttal of allegations of corporate fraud levelled against its listed companies last month by short seller Hindenburg Research, Adani Group claimed the accusations were “not merely an unwarranted attack on any specific company but a calculated attack on India”, including its “growth story and ambition”.

Hindenburg, which had argued that the conglomerate had manipulated the prices of shares in its various publicly traded businesses, was quick to respond, insisting that “fraud cannot be obfuscated by nationalism” and that Adani Group’s growth should not be conflated with India’s.

It is understandable that Hindenburg wants to put daylight between the ambitions of Gautam Adani – the world’s third-richest man at the start of this year and the owner of the ports-to-power group that bears his name – and those of the world’s fastest-growing economy. However, the lines are blurred in the eyes of investors, though many of them remain bullish on India.

Hindenburg’s allegations have had a huge impact on the value of Adani Group’s listed companies, wiping more than US$140 billion off their combined market capitalisation. Adani Enterprises, the group’s flagship firm, was forced to call off a US$2.4 billion share sale earlier this month aimed at broadening its investor base.

In addition to disrupting its financing plans, Hindenburg’s accusations have put Adani Group’s debt-fuelled acquisition spree and its corporate governance under scrutiny.

The affair is an embarrassment for Indian Prime Minister Narendra Modi, who has long-standing ties to Adani and who relies on large conglomerates such as his to invest in the country’s infrastructure and emerging industries.