Adani’s Economic Empire- A Go Go Growth Illusory


A three-judge bench of the Supreme Court, headed by Chief Justice of India (CJI) D. Y. Chandrachud,  on 10th February expressed concern over the acute downfall in share values of  Adani Group  and observed that  “there is a need to protect Indian investors from sudden market volatility”. The stock market is now not just limited to “high value investors” but it also includes a “wide spectrum of middle-class investors”. “How do we ensure that what happened does not happen again in the future?” the CJI had remarked.

It sought to know how the government can prevent the loss to a large number of stake holders. The Supreme Court, has called for a note from market regulator- Securities Exchange Board of India (SEBI) on the regulatory mechanism of stock markets. The Government of India which was rejecting for an enquiry panel, ultimately conceded for constitution of a committee of experts and took permission to present the names of experts in a sealed cover to the court to look into this matter provided the present statutory regime and regulatory mechanism are not undermined at any cost.

Earlier the Finance Minister Nirmala Sitharaman said “I will not reveal what the Centre’s response will be in the highest court. But the regulators have taken this matter into consideration objectively.” No matter how much the opposition insisted, there was no discussion in Parliament, and there was no mention of Adani in the prime minister’s long speech on the budget. His answer was so framed that there was no inkling of any such thing as a scam in the country. How is the government responsible for what has happened in a private company? was the attitude exhibited. But this is not a simple thing to brush off. It is a financial scam and crime, causing a loss to the tune of Rs10 lakh crores to the people.

India’s richest man Gautam Adani has announced plans to issue new shares to raise crores of rupees to meet his liabilities.  The Adani Group has a market value of over $200 billion. A small American short seller firm called Hindenburg Research has released a report recently accusing Adani of running a business “shamelessly for decades” with “stock manipulation and fraud accounting schemes”. Adani immediately denounced the report as “baseless” and “harm ful”, but the market response came swiftly and brutally. Before the week turned out, the business empire has melted down by 50% of its market value.

Adani, who was ranked third on the Forbes rich list with a net worth of $126.4 billion, slipped to 17th position with $61.9 billion after the fall in stock market.  Day by day this position is descending.  It was a big U-turn for Adani. We need to know how this disastrous fall took place in the backdrop of the fact that the share prices of some of his companies have risen by more than 1,000% in the Indian stock market over the last few years and why the government is silent despite the fact that Indian investors have suffered a loss of lakhs of crores of rupees. We need to understand how the Indian economy is running.

Gautam Adani started his career as a commodities trader with a turnover of just Rs 2.2 crore in 1988   and within no time built a large financial empire of his own in an unprecedented manner. He swiftly became Asia’s richest man with a wealth of about Rs 12 lakh crore. Until recently, he was recorded as the third-richest man in the world. Interestingly during the same period, Mr. Narendra Modi, a Hindutva activist reigned Gujarat from 2001 to 2014 as chief minister. His period was marked with communal hatred, riots and violence. In spite of this ill fame, he rose to the position of Prime Minister of India in 2014, with slogans of development and national supremacy. His period in Gujarat was prompted as Gujarat’s model of Development. Soon Modi is presented as an international leader.

Both Adani and Modi attracted the attention of the world for their phenomenal raise and both belonged to the state of Gujarat. There was a sense of interest, suspicion and curiosity about their relationship at home and abroad. After Modi came to power at the Centre, Adani’s success run continued unabated. His wealth has increased from $8 billion in 2014 to $150 billion now, of which about $100 billion has been amassed by the rise in share prices in the last three years.

Many believe that Modi has emerged as prime minister using the resources, facilities and aircrafts provided by Adani’s group. In return, Modi’s government kept aside the rules and regulations or modified them in favor of Adani, attacked his opponents and created opportunities to Adani. Many suspect whether it is not true that the central government is providing Adani with many benefits by using central agencies [ED,CBI etc.,] to threaten, harass, intimidate or attack  his opponent business houses and keep them out from the contest.

He was given six airports, including Mumbai, and several major ports in Andhra and elsewhere. He was given countless loans from several public sector banks and institutions and created preconditions for success of his business. It is widely believed that mines and power projects abroad were pocketed by him with political patronage, especially Modi’s direct involvement.  The Adani Group has grown into a multinational company, and some people think that the Modi sarkar means Adani Sarkar, which many analysts and opponents are looking into in-depth.

 Hindenburg report :  

On January 24th 2023, the Hindenburg Company released a report examining Adani’s rapidly growing assets and businesses, which did not conform to market expectations. The release of this report plunged into a catastrophe and choked the Adani empire. The Hindenburg report alleges that the company is over-displaying the value of its wealth, undermining its debts, dubiously inflating its profits, and using unethical accounting methods to support their claims. In addition to these financial irregularities, the Adani Group has also indulged in insider trading and tax evasion-it was alleged. The allegations were made citing documents from regulatory agencies of the Government of India.

The company has been accused of large-scale deforestation, damaging ecosystems and polluting groundwater and air. It is very strange that this environmental destruction is taking place in the name of green energy. According to Hinden burg Research, the Carmichael coal mine port proposed by the company in Australia is a major environmental hazard.The report states that the Adani Group ignored the concerns of local communities and did not comply with environmental regulations.

The company is using its political strings to obtain favorable approvals from the Government of  India, to gain unfair advantages in the domestic industry, and to achieve prestigious projects abroad as well.  Hindenburg Research said that there is no corporate governance in this group. The founder Gautam Adani is controlling and is causing losses to minority shareholders. Of the 22 key directors, 8 are members of the Adani family.

Adani’s younger brother Rajesh is the managing director of the Adani Group. He has been arrested twice in the past on charges of economic offences. Adani’s brother-in-law Samir Vora is an executive director. The DRI had alleged that he was a ring leader of financial frauds in the diamond business.  Vinod   Adani, Gautam Adani’s elder brother, is known as the untraceable thief, runs around 38 shell companies, including the large-scale tax evasion and financial irregularities in India by placing bogus [shell] companies in some countries known as tax havens.

The summary of the report is that the level of debt is of the utmost concern. Hindenburg Research has alleged that the group manipulated stock prices by using shares as collateral. The Adani empire is carrying a debt burden of $30 billion. Fitch Group’s research firm Credit Sites, last year published a report titled “Deep Over Elevated” about the Adani Group, in which it expressed strong concern about its debt funding growth plans. To which the Adani Group responded by saying that the credit ratios of its companies continue to be healthy and are in line with industry benchmarks in their respective sectors.  Markets regulator Securities and Exchange Board of India has been investigating these issues over the past one year. It warned of the danger of these irregularities.  Vinod Adani’s paper companies have close links with notorious share market criminals like Dharmesh Doshi and Ketan Parekh. SEBI is investigating these investments and irregularities.

Consequences of the report:

Shares of their listed companies declined after the report, wiping out a large portion of the company’s market capitalisation. A loss of $86 billion in listed stocks and also led to the sale of its bonds listed abroad. This is also rocking Parliament as the biggest stock market scam ever committed. The opposition parties are demanding to investigate the matter and set up a joint parliamentary committee.  The Chairman of the Rajya Sabha rejected even discussing the matter and told that parliament should not be used to make anti-national statements on the basis of foreign reports. The government is putting forth all efforts to save Adani and its own skin.  An attempt is being made to link his business of corruption with patriotism.

The Adani Group rejected the contents of the report and said it would take legal action against the company. As an answer to the 88 questions posed by the short seller company, more than 400 pages of long, angry condemnation has been released by Adani.  “We are fully committed to Indian laws and regulations and are working in accordance with the highest ethical values and environmental standards,” the company said in a statement and stressed on its commitment to providing socially responsible projects.

In a bid to woo investors back amid a fall in stock exchange, Gautam Adani and his family have prepaid loans worth $111.4 million raised by pledging shares of various listed companies despite the scheduled repayment extends up to September 2024.  Swapnil Shah, director of brokerage firm Stokes Box Research, said, “In the short term, the markets will be driven by sentiment and sentiments are working against the Adani Group after this report.”

While the Adani Group strongly denies all the allegations, it is important to carry out a thorough investigation into the claims made in the report. The report highlights the need for increasing transparency and accountability in the business world and the  importance of  ensuring that companies function ethically and consistently.

According to the Bloomberg Billionaires Index, despite wiping out nearly $40 billion from his personal net worth recently, Adani is still Asia’s richest man with $82 billion, which is $2 billion more than another richest Indian industrialist Mukesh Ambani who stands next to Adani. Experts and media promote them as the most able and successful entrepreneurs. But it is to be noted that the number of super-rich individuals in India is growing rapidly due to government policies followed from the day of  “independence”

 Nature of industrial growth in India

In the early decades of independence, the Indian capitalist class was not strong enough because of the British colonial plunder and the  exploitative rule did not develop independent local  industrialization. Exporting natural resources, and raw materials to England and importing the finished goods  for consumption was the order  and local manufacturing did not develop. Hence the local bourgeoise was either a comprador to British imperialism or weak entrepreneur. They could not build huge infrastructure needed for their own development.

Therefore, India’s largest infrastructure was built by the Government of India by establishing public sector undertakings. The fruits of such big industries and projects were made available to big bourgeoise at cheaper rates and all resources kept at their disposal. They made out profits through their manufacturing units. But the comprador nature of the ruling class was favoring foreign multinational companies to establish in India and were not inclined to follow an independent economic policy to establish a strong and large industrial sector. So, private investors with national interest were less and a big comprador bourgeoise developed soon. It needed licensing and permits and support of government at every step. In that state, relations between the heads of state and the big capitalists were intertwined and dependent.

The development of the public sector would have contributed to the profits of the entire private investors but went into pockets of influential, and manipulative institutions. As the big capitalist class emerged and grew stronger, it gradually engulfed the public sector and reached the stage of acquiring institutions such as the airways, railways, sea ports, airports, LIC etc., in the service sector rather than in manufacturing. Under the pretext of less government and high governance all industries are transferred to private sector for their benefit.

whether it was the establishment of public sector industries, the nationalization of financial institutions in the beginning or the privatization of large industries today, in essence, both methods are paving a way for the monopoly of the big capitalists. Today, the rulers of India focus on the capitalist development model The concept of the welfare state, which existed until the 90s, or the liberal refo rm of today, is only a change in form, two faces of same coin intended for the benefit and development of big bourgeoise.

In this system, the government’s economic policies are the key to the economic growth of these monopolists. In the past, Dhirubhai Ambani, who had grown up surprisingly, also built his Reliance Empire worth Rs. 75,000 crores by using the policies of the then Indira Gandhi government, using laws and policies favorably and adapting them, wetting the hands of high-ranking employees and bureaucrats, and managing things on the basis of loopholes in policies.  Ambani used to say the secret of his success that the use of political relations was the key to the growth of capital, but this political rhetoric was then a bit of a secret. This modus operandi was a bit tortuous and 30 years later this policy became an open affair.

Neoliberal reforms model :

Today’s big industrialists, comprador capitalists and MNCs have entered  the political arena and have taken the lead in tailoring the policies of the government to suit them, either by directly sharing the law making, administrative bodies or by seating their humble allies in power. It was with similar methods that Adani also amassed his wealth.

Goutam Adani, a first-generation entrepreneur, founded a commodity trading business in 1988. He   quickly built his economic empire by taking advantage of the New liberal economic reforms and the facilities of globalization undertaken by the Government of India in the 1990s. He expanded by adapting our system of governance to his advantage. By 1994 he listed his company on the Stock Exchange in Mumbai. A year later, Adani started managing the Mundra Port in Gujarat. Now this port is treated as crown of his business. It was Chiman Bhai Patel’s Congress government that gave the port’s land to him. After wards, he went into close association with the subsequent BJP Governments in Gujarat. Since 2000s, his business received much encouragement and undue support from Narendra Modi, the then chief minister of Gujarat. As a result, many of Adani’s companies attained the foremost position in their respective fields.

Today it is a huge group with more than 23,000 employees. Enter your email to subscribe to the CNN Business Newsletter.The bottom of the formIn recent years, he has expanded to many sectors, from media and data centers to airports. He invests in areas where the prime minister focuses his developmental priority. The government policies are being tuned to increase his business and profits, and changes offered from fossil fuels to the expansion of green energy projects.

There is a dependent bias of a political-economic lobby, which means that his growth depends heavily on crony capitalism. Understandable by the realities like state-owned LIC has invested more than Rs 35,917 crore [today’s market value of about Rs 60,000 crore] and SBI Bank lending Rs 27,000 crore to this group. “Adani group of companies have a total debt of Rs 2 lakh crore, of which 40%  equivalent to Rs 80,000 crore has been provided  by banking sector” a C. L. S. A. report states. In this situation many economists are skeptical whether this empire can survive without governments’ patronage or if the government changes.

International expansion and official support :

In line with the “Neighbour hood First” policy pursued over the last few years, by the Modi-led government, Adani  always  is allotted  a major chunk in the ongoing trade with neighboring countries like Bangladesh, Sri Lanka, Nepal and  Myanmar. Adani was awarded the Bangladesh power project. The $500 million green energy projects in Sri Lanka were awarded to Adani, and the chairman of the Sri Lankan Energy Board told their parliamentary panel that it was done on Modi’s recommendation. However, he later withdrew it and restated that it was a decision made by the governments of the two countries.  Anyone can understand the high level of political pressure behind this turnabout labeled as “power diplomacy”. Earlier, the Sri Lankan Port Authority had approved Adani to build a large port worth $700 million. It is customary for Adani to visit those countries to make trade deals either before or after Modi’s foreign trips or along with the prime minister himself.

“They are a well-established group in systemically important businesses. and will come out of the crisis very soon,” said Rajat Sharma, founder of financial advisory firm Sana Securities. “only one-third of our total debts have been given to it”, the Chairman of SBI Bank, said. Raj Kumar, managing director of Life Insurance Corporation (LIC), which has invested more than $4 billion in the Adani Group said, “ LIC invested only 0.9% of our asset value in the Adani Group”. They are desperate to claim that the Adani crisis has not affected our economy in any way. It is clear that such statements are made to minimize their role in the loss and thereby prevent the Modi government’s image from blurring. The Indian stock market regulator is yet to make a statement on the allegations

Economic and Political Nexus:

The successive Governments in India are acting in collaboration with monopolists  and big corporate capitalists, compradors and imperialist exploiters. They are colluded in exploiting the people. So, this is not just limited to Modi-Adani friendship. This is a part of collaboration of the monopolists and the governments. This is class friendliness. It may one day be in the form of Dhirubhai Ambani-Indira gandhi’s cold collaboration. The other day it may be seen as a bond between Mukesh Ambani and the Congress, or lesser known kotak-Congress alliance, or as directly as the Modi-Adani alliance. What is going on is money-power, and what is said is democracy. Even if Modi and Ambani are not personal friends such cliques continue. They are pro-financial tycoons. Otherwise, how is it possible for Mukesh Ambani to earn Rs 300 crore a day? How does he have assets worth Rs 3 lakh crore?

The stock market scams and Adani’s style of functioning that have emerged today are not new, but the government’s reaction is new and ironic. We may recall the Harshad Mehta scam of 1992, which lead to a loss of Rs 5,000 crore. The value of shares was inflated by manipulating with the help of bank receipts and the bubble burst eventually. The 1996 Bhansali scam of Rs 1200 crore, who rigged the rates of shares using fixed deposits and mutual funds, Khetan Parekh who artificially increased the value of shares with funds raised from banks, the scam caused a loss of Rs 40,000 crore; In 2001, the turmoil with UTI Mutual Funds, and the 2009 case of Satyam Ramalinga Raju whose assets were shown to be several times higher [545 rupees share fell to Rs 12], the loss estimated as  Rs7400 crores. The Sahara [Subroto Roy] scam that illegally collected Rs 24,000 crore from two and a half crore people, the Saradha Chit Fund [Sudipta Sen], scam who collected Rs20-30 thousand crores from 17 lakh people and collapsed in 2013.

It is true that in all these cases, non-existent assets are shown with sky-high values, promising highest profits and collecting inflated share values from the public and then closing down the firm on a fine day. All of them influenced the stock market with the help of banks and looted funds from the people with false promises. It is also true that all such scams involved or backed by highly influ ential political forces. Despite this history, Finance Minister Nirmala Sitharaman says, “The regulators of India’s financial institutions are very, very experienced and experts. Regulators will be ready not only now but forever to address these issues,”

The unholy relationship between the economic whales and the top political leaders is such that a senior BJP leader like Subramanian Swamy wants the BJP to nationalize Adani’s assets, auction them and help those who have suffered losses, and prove BJPs cleanliness in politics.

While 40% of the country’s wealth is in the hands of the richest 1% at the highest level, only 3% of the national assets are owned by the bottom 50% of the population [ i.e. 700 million people]. While 85% of the people’s incomes are declining in this administration, the number of billionaires is increasing. The number of billionaires increased from 102 in 2020 to 166 at the end of 2022. The assets of the top 10 richest of them increased to Rs 27.5 lakh crore [a growth of 32%] while the number of poorest reached the number one position in the world with 22.80 crores of people. Nowhere else such a serious disparity in the distribution of wealth can be seen.

Instead of survival of the fittest, the principle of survival of the richest is being implemented and encouraged in the country. The wealth of the most richest people is growing at the rate of Rs 2.5 crore per minute. As a result of this unequal development, the number of poor people has increased from 19 crore to 35 crore.

Along with the economics we should focus on political agenda too. Criticism of a corrupt business is portrayed as anti-national. The RSS magazine “Organizer” wrote that it was a “huge conspiracy abroad” against Adani, who is contributing a lot for development of India.  “Some of the sold-out leftists and unpatriotic persons have conspired since 2016 to tarnish his image, the Hindenburg report is a part of it” they say. They also wrote that criticizing Adani meant criticizing Modi. And questioning Modi is the most heinous job and only an anti- Indian can do it. as per their precepts. The Prime minister is totally silent on Adani and ignores that there is a big scam in the country. The financial scam of lakhs of crores of rupees is being taken so lightly. Cronyism is flourishing  and the stake holders are  calm and  shameless. The real question is- how long will we bear this system and carry it on our shoulders?

Dr.S. Jatin Kumar  is a political commentator

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