India’s Gautam Adani: is Asia’s richest man still ‘a goose that lays golden eggs’ despite a debt-fuelled spending spree?

Thanks in part to his close ties with Indian PM Narendra Modi, Gautam Adani has grown a business empire that makes him the third richest man on Earth

His Adani Group’s rise has been meteoric. But will US$28.8 billion in debts send it crashing back down, as analysts warn it’s ‘deeply overleveraged’?

Reading Time:6 minutes

Indian billionaire Gautam Adani pictured in Ahmedabad in 2014. Photo: Reuters

Published: 7:30pm, 1 Sep 2022Updated: 9:50am, 12 Sep 2022

Self-made Indian tycoon Gautam Adani’s wealth has skyrocketed as he backs Prime Minister Narendra Modi’s infrastructure and green energy push, but amid the Adani Group’s aggressive expansion, analysts have questioned the speed and prudence of some of his investments.

For the last few years, Adani’s ports-to-energy group – India’s third-largest conglomerate after the Tata Group and Mukesh Ambani’s Reliance Industries – has been on a debt-fuelled deal-making spree. Now, warning lights are flashing over whether 60-year-old Adani’s aggressive empire-building is sustainable.

Fitch Group’s debt-research arm CreditSights called the Adani Group “deeply overleveraged” in a strongly worded report last week, calculating its debt at US$28.8 billion. The group’s “quick rate of growth and high levels of leverage are causing us, as well as other clients and other investors, to have reservations”, wrote analysts Lakshmanan R, Rohan Kapur, and Jonathan Tan.

The logo of the Adani Group is seen on one of its buildings on the outskirts of Ahmedabad, India. Photo: Reuters

The group “has a wonderful track record of churning out strong and stable enterprises and boasts a portfolio of solid infrastructure assets,” CreditSight said, adding that Adani’s “entrepreneurial vision is impressive”. But debt, it warned, could be his empire’s downfall.

In what it described as the “worst-case scenario”, CreditSight said “overly ambitious debt-funded growth plans could eventually spiral into a massive debt trap”, which may lead to parts of the group falling into financial distress or defaulting – and weighing heavily on India’s economy given their sheer size.

None of these concerns has put a brake on Adani’s ballooning fortune, however, which this week vaulted him into third place globally in the Bloomberg Billionaires Index, behind Tesla’s Elon Musk and Amazon’s Jeff Bezos. Adani, whose wealth Bloomberg pegged at US$143 billion, is the first Asian to break into the top-three rankings. Bloomberg said Adani has added US$66.2 billion to his wealth in 2022 alone, making him the only member of the index’s top 10 not to see their wealth drop this year.

What’s behind Adani’s gravity-defying ascent?

Adani’s meteoric rise has been driven by the soaring share prices of his namesake group’s seven listed companies – as his family own up to 75 per cent of each. The combined market value of those companies rose tenfold over the past three years to US$220 billion.