Introduction

The allegations over how the Adani group built up his corporate
empire made by the Hindenburg Research exposed the nefarious
manner in which the Corporate-Communal (Hindutva) nexus that
has come to rule India since 2014 has been operating. Adani terming
the allegations against how his corporate empire was built as an
attack against the “Indian Nation”, follows the Modi government’s
justification of banning the BBC documentaries by labelling them
as “products of a colonial mindset”. By implication both Modi and
Adani categorize any exposure of their misdeeds as attack on the
‘Indian Nation’. The Modi- Adani alliance which is the core of the
Corporate-Communal (Hindutva) alliance is equated with the ‘Indian
Nation’! Crony capitalism is, thus, justified as being in the interest
of the Indian nation. Any questions about how this crony capitalism
is looting India’s national assets, imposing unbearable miseries on
the people by curtailing welfare expenditures (diverted for crony
corporate profits), the suppression of all expression of dissent as
‘enemies of the nation’ leading to the imposition of full-scale
authoritarian rule are all termed as ‘anti-national’.
From this, it follows that there is no need for any enquiry into
the acts of brazen misdeeds, acts of omission and commission on
how this nexus and crony capitalism has been operating, including
looting thousands of crores of rupees of people’s hard-earned savings
from nationalized financial institutions like State Bank of India or
the Life Insurance Corporation. Modi government refused to
constitute a Joint Parliamentary Committee or a Supreme Court
monitored High-power enquiry into these allegations in the
Parliament.

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 When Modi government assumed office in 2014, the Adani
group had a market capitalization of $7.1 billion according to Forbes.
This zoomed to a $ 200 billion by 2022. In the international ranking,
Adani was at 609 in 2014 astronomically growing to become the
world’s second richest corporate by 2022. It operates seven public
listed companies and 578 subsidiaries. According to global Energy
Monitor, it is the largest developer of coal power plants in the world.
Adani’s Balloon Running out of Gas
It operates 8 airports and 13 sea ports in India and has substantial
interests in sectors like coal mining, oil and gas exploration, gas
distribution, transmission and distribution of electricity, civil Adani’s meteoric rise as a capitalist has been coupled with Modi’s
construction and infrastructure, food storage, education, real estate, rise to power, first in Gujarat and from 2014 onwards, on a pan-
edible oil, international trade etc. Indian scale. The Hindenburg report—How The World’s 3rd Richest
Man Is Pulling The Largest Con In Corporate History—points out
Over these years, Adani group received the most gracious of that the Adani Empire is based on huge sums of borrowed money;
terms from the Modi government with the handing over of and that his high stock valuation is the result of stock manipulation
government land at throw away prices, environmental clearances by Mauritius-based entities linked to him and his family. The crime
adversely affecting climate impacts, disbursal of loans from is not crony capitalism. It is when the acts of a specific capitalist or
nationalized banks and financial institutions, State help to acquire a group of capitalists threaten the state or endanger capitalism itself;
assets being operated by other corporates and State influence in that is when the capitalist class turns moral about crony capitalism.
foreign countries to acquire coal mines, ports etc. Before we go into the details of the Hindenburg Report and the
Market regulators ignored the charges of insider trading, round run thereafter on his shares, we need to recap the Adani Empire, and
tripping and manipulation which are legally debarred under stock how, in the last three years, the share price of his flagship company
market regulations apart from the operation of offshore funds. Adani Enterprises Limited (AEL), had risen by nearly 15 times. As
Since the Hindenburg exposures, the Adani empire with a the Economist chart shows, in April 2021, the Adani Group crossed
market value of $ 200 billion collapsed by less than half. An FPO US$100 billion in market capitalization, and by April 2022, it crossed
(Follow-up Public Offering) had to be scrapped. Its dollar US$200 billion. It reached more than $ 250 billion before the laws
denominated bond offers had to be shelved. Many who had invested of gravity and the Hindenburg Report caught up, leading to its
in Adani shares have been ruined as a result. precipitate fall. Even then, it still has a significant presence.
This rise in share price has been the result of stock price
In this background it is necessary to try and understand how manipulation by entities that seem to be owned by his family or those
this Corporate-Communal nexus is operating and the manner in close to him. It is this meteoric rise in share prices that made Gautam
which the Indian state is grossly misused to promote such crony Adani, for a brief period, the Second Richest man in the world. Even
capitalism in order to meet the challenges and dangers ahead. This after his net worth fell from $124 billion on 17 Jan to $61.3 billion as
booklet is an effort in this direction. of 4 Feb, he remains among the thirty richest in the world.
Sitaram Yechury After the publication of the Hindenburg Report, Adani
General Secretary Enterprises Ltd., his flagship company, has already lost more than
15 February, 2023 CPI(M) 50% of its value in the stock exchange. As Business Standard observed

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 creditors are extremely worried about future payment from the Adani
Empire and about the value of the collateral they hold. A number of
banks abroad have stated that they will no longer take bonds as
collateral for bank loans; this is another blow to Adani. If the financial
market sours on the India story and believes it consists of Adani and
Recently controlled* his ilk, it will be that much harder for Indian businesses to raise
capital abroad.
Adani’s internal borrowings are from banks, insurance
companies, mutual funds, etc., and the savings of the middle classes.
With the Modi government’s systematic steps to force us to hand
over our savings directly to capitalists via stock markets or mutual
funds—withdrawing savings schemes or lowering their interest
rates—this trend has been accelerating. But with Adani’s stock
Other Adani manipulation being exposed and his shares tanking, the possibility
of large-scale transfer of people’s savings to the stock market will
not be easy. For the Indian capitalist class, this would mean that the
Adani Enterprises Indian growth story, based on large-scale borrowings—externally and
internally—could fall apart. Commenting on the Hindenburg
Report, Bloomberg wrote, “The fallout from its almost 100-page
report (Hindenburg Report) threatens to undermine investor
Economist: Feb.1st 2023 confidence in India more broadly, and in the nation’s regulatory
framework.” (Adani’s $108 Billion Crisis Shakes Investors’ Faith in
on February 2, 2023, “Adani group shares sank on Thursday...swelling
India, 3 February 2023). That is why the SEBI, the banks and even
the conglomerate’s market losses to more than $100 billion and
the Department of Revenue Intelligence have got into the act of
sparking worries about the potential systemic impact.” This is apart
probing Adani’s shenanigans, even if these probes may largely be an
from the political impact of Adani’s fortunes sinking: Adani’s past
eyewash. After all, the DRI investigations and orders have been either
and present (and possibly, future), are so closely tied to Narendra
slowed or overturned, including the ones on the diamond trade, coal,
Modi, from his days as CM of Gujarat to his becoming India’s PM
and power plant equipment imports.
and the BJP’s undisputed Number One.
Before we get into Adani’s current crisis and its impact on the
Why should the capitalist class worry about the sinking of
Indian economy, let us see how Adani built his Empire, starting with
Adani’s companies? What is the systemic impact on India that the
his flagship company Adani Enterprises Ltd. This was set up in 1993
financial commentators are talking about?
as Adani Exports Ltd, and later renamed as Adani Enterprise Limited
India Inc, meaning Indian capital, has raised a lot of money
in 2006. This is the “mother” company that funds its other companies,
from the international market, as did Adani. The major driver of
acts as the instrument of raising capital and keeps control of other
Adani’s rise in the last few years has been borrowing from the
group companies. We are not counting ACC, Ambuja Cement and
international bond market. Adani pledged his shares to creditors as
NDTV here, as they are late acquisitions and have little to do with
collateral in order to raise the money. With the rapid fall in his shares,
his Empire.

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Adani’s Early Years and His Diamond Trade government export credit program that rewarded exporters by giving
Before building the private Mundra Port and creating the Special them tax credits. In just one of those years, 2004-2005, Adani
Economic Zone (SEZ) there, Adani was primarily a trader. He started Enterprises and its associated companies fraudulently claimed Rs.
in the diamond trade in the ’80s and set up his company in 1988, 680 crores in government export benefits (U.S. $151 million at the
initially for trading in diamonds and later branching out into plastics time). The difference in the price of the diamonds during this round
and other goods. His initial fortune is from the diamond trade, in tripping—Adani Enterprises to Adani Enterprises, as seen in the
which his brothers Vinod Adani (also known as Vinod Shantilal Shah), graphic below via intermediaries—could then be kept in Mauritius
Rajesh Adani, and his brother-in-law Samir Vora played major roles. and other tax havens.
The two Adani brothers and Samir Vora are identified as key figures In today’s terms, this may be a small amount for Adani but this
in the Hindenburg Report, Vinod for his links in the United Arab was tax-free money salted away in various tax havens, which could
Emirates and other off-shore havens for “hot” money, and Rajesh and would be used for various other schemes. The route of inflating
and Samir Vora for setting up and controlling the Mauritius entities the value of goods, round-tripping of money, availing of tax “benefits”
that own parts of the Adani companies’ stock. (read handouts), without actually producing goods, were all tricks
Samir Vora is also the Executive Director in Adani Australia, which the Adani Empire would use in the future. As also the role of
which holds major investments in a coal mine, Carmichael mines his immediate family: brothers Vinod Adani (or Vinod Shantilal Shah),
and rail project, and controls a port, Abbot Point Terminal, in Australia. Rajiv Adani and his brother-in-law Samir Vora. These were the three
It is the stock of these opaque Mauritius entities when combined lynch-pins of his Empire abroad, involved in round-tripping of money
with Gautam Adani’s own shares in the Adani companies that take it and of share price manipulations. As Adani expanded his trading
over the 75% bar that SEBI has for promoter group holdings in a empire from diamonds to plastics, and then coal and other equipment,
public limited company. What critics have maintained is that Adani all these tricks, and tax havens like Dubai and Singapore, were used
uses these “benami” entities to inflate his stock price through circular to artificially inflate the price of coal and equipment and fleece the
trading, which lead to the skyrocketing value of his shares before its Indian consumers.
recent crash. It is how major stock market scams have happened in
the past — the Harshad Mehta and Ketan Parekh scams being the Mundra Port and Modi’s Gift of Land to Adani
most famous of the lot. In 1999, SEBI charged Ketan Parekh with Adani’s first big capitalist enterprise — on which the major part
stock manipulation of a set of companies, one of which was Adani of his Empire stands — is the Mundra Port and Special Economic
Exports Ltd. SEBI investigated the sudden and artificial 165% rise Zone (MPSEZ). Though Adani received land in the Kutch district’s
of Adani shares, and banned 7 Adani companies for two years from Mundra block, first from Chief Minister Chimanbhai Patel in 1993,
trading in shares because of market manipulation. and later from Shankar Singh Waghela and Keshubhai Patel, they
So how did a diamond trader end up being one of the richest were not significant in terms of what Narendra Modi gave Adani
persons in the world? The start, according to the Department of from 2006-2012.
Revenue Intelligence (DRI), lies in his fictitious trade in diamonds, The total amount of land handed over to Adani in a series of
in which rough diamonds were imported and re-exported, as shown such transfers was a humungous 15,946.32 acres or 65 sq km, nearly
in the graphic below in Hindenburg’s report (based on DRI Order half the area of Vadodara. Adani is not only building an SEZ but an
Dated 14.01.2013). entire city. There is no other example in India of handing over the
The DRI’s case was simple. The government of India had right to build an entire city to a single private capitalist.
provided incentives for exports, known as the Target Plus scheme, a The largest chunk of this land was given to Adani by Modi in

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2005-06 at an average price of Rs. 14.50 per sq metre, far lower than Pollution Control by Government of Gujarat, 2022), “Filling low-
any such transfers to any other business house. According to Business lying areas with fly ash requires prior approval of GPCB. The Adani
Standard (Adani Group got land at cheapest rates in Modi’s Gujarat, Power (Mundra) Limited (APL) utilised 15.42 lakh MT fly ash for
Premal Balan & Kalpesh Damor, April 26, 2014) .”..there was no filling low-lying areas between 2014-15 and 2018-19 without the
other instance of land being allotted at Rs 1 to Rs 32 per sq mt to any approval of GPCB and reported 100 per cent utilisation.” The
company or industrial group. Only educational or religious institutions discharge of fly and bottom ash in low-lying land, instead of 100%
were an exception.” The cost of the land handed over to Adani was ash utilisation as committed, is in gross violation of environmental
also much lower than the market price, and completely bypassed the clearances, the basis for setting up of the plants.
villagers, graziers, and fisherfolk, whose livelihoods were ruined. Most Indian plants use indigenous coal in which sulphur content
Village land and grazing land were taken over without following the is low. Both Adani Power and Tata Power plants were set up based
procedure of consulting the villagers, and plants were set up without on the import of coal from Indonesia and other countries, all of which
many of the necessary statutory clearances. tend to have higher sulphur content. Therefore flue-gas
desulphurisation (FGD) units are critical in reducing acid rain in the
Good Bargain or Bonanza area. In Mundra, out of the 14 units (9 of Adani Power and 5 of Tata
A comparison of land given to some companies by the Gujarat govt. Power), only 3 have installed FGD units!
Company Area (acres) Location Rate Period
The report of the Sunita Narain Committee set up by the
(Rs.@sq.mt.) government confirmed the villagers’ complaints. It said the Adani
APSEZ 15,946(6,456ha) Mundra (non-agri arid land 1-32 2006-2008 SEZ had violated a number of rules and regulations in the Mundra
Tata Motors 1,110 Sanand (industrial) 900 2008-2009
project, destroying mangroves, filling creeks and causing land and
water degradation by dumping fly ash. Further, the Mundra plant
Ford India 460 Sanand (industrial) 1,110 2010-2011
uses seawater for cooling the turbine exhaust which is stored in a
Maruti Suzuki 700 (approx) Hansal (GIDC land) 670 2011-2012 reservoir and pumped back into the sea. Unfortunately, neither the
APSEZ : Adani Port and Special Economic Zone; GIDC: Gujarat Industrial reservoir nor the pipelines/seawater channels are lined, causing saline
Development Corporation [1 acre=4,046.86 sq.meters] water to contaminate the groundwater making it unfit for either
(April 26, 2014, Business Standard quoted above) drinking or agriculture. As a consequence, both agriculture and grazing
lands have been destroyed ruining the people, while Adani and his
Adani and Mundra SEZ Violation of Environmental Clearance Empire have minted billions out of Mundra.
Conditions and Pollution Control Rules
Even when such clearances, such as environmental clearances Power Equipment and Coal Imports
were taken, Adani continued to violate their conditions. For example, The Maharashtra Eastern Grid Power Transmission Company
Adani Power, set up in Mundra, is the second largest power plant in Ltd (MEGPTCL) was responsible for power transmission in
the country with 9 units and a total installed capacity of 4,620MW, 5 Maharashtra and a transmission utility. It operates with its price for
of them super-critical units of 660 MW size. If this is not enough, electricity transmission being fixed by the Maharashtra regulator on
Tata has set up a 4,000 MW Mega power plant in Mundra. The a cost-plus basis as wheeling charges. Therefore, the higher the capital
consequence has been the utter devastation of the farm and grazing cost, the higher the wheeling charges that MEGPTCL can levy on
lands. According to the CAG Report (Performance Audit of Air the distribution companies, which will recover it from the consumers
in Maharashtra. The Guardian in 2014 reported that Adani, as detailed

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by the Department of Revenue Intelligence (DRI), was to use wholly The most well-known case of such over-invoicing of exports and
owned intermediaries who would jack up equipment prices by four inflating capital costs would be Enron’s gas-based plant in Dabhol
to eight times while the equipment was still at sea. A one-time hike — if Enron had not sunk in the US for flagrant cooking of its books.
in the equipment cost, therefore, becomes a perpetual cash cow for Unfortunately for India, the sovereign guarantee given to Enron by
the transmission company (or at least till the equipment life is over, the 16-day Vajpayee government in 1998 meant that we had to shell
which can be 30-40 years)! out a huge amount of money as compensation to GE, who took over
MEGPTCL, the transmission company, is a wholly-owned Enron’s liabilities and sued India abroad.
subsidiary of Adani Enterprise Ltd (AEL). PMC Projects India Pvt Adani is India’s biggest importer of coal today. He started a
Ltd was a contractor to MEGPTCL for supplying it with transmission major expansion of his coal trading activities after setting up the
equipment. PMC bought equipment from 4 suppliers in South Korea Mundra Port and his power plants. He also bought Indonesian mines
and China via Electrogen Infra FZE UAE. Electrogen Infra FZE to supply coal to his Mundra plant. Again, his coal empire did exactly
(EIFZE) was an Adani shell company, and its parent is headquartered what his transmission company did, as details from DRI investigations
in Mauritius. The equipment was shipped directly from ports in South show. Paranjoy Guha Thakurta and Aman Malik, in their EPW article
Korea and China to India, so the transactions between PMC and dated 2 April 2016, have detailed the Rs. 29,000 crore due to over-
Electrogen Infra FZE, UAE, were only to inflate the prices and siphon invoicing coal imports.
off the huge difference in prices to Mauritius. It did not involve the What is the impact of inflating fuel or equipment costs on
suppliers but comprised, entirely, transactions between Adani entities. consumers? Coal costs are pass-through, meaning that the power
The sole purpose of the transaction was to inflate the price of the plant is paid the full cost of fuel that it buys (or imports). Typically,
equipment by 400%-800%! The difference between the actual prices fuel cost is 50 per cent of the energy cost, the other 50 per cent being
paid and the prices charged to MEGPTCL (as per DRI documents) other running costs and the cost of capital. Adani’s importing fuel
was to the tune of nearly Rs. 1,500 crores! A chart of the various and showing a higher cost by using an Adani intermediary meant
Adani entities and the equipment suppliers in the transactions (based that for every unit of energy it sold, it realised an extra benefit ranging
on DRI documents) is given below. from Rs 0.50 to Rs 1.50. The long-term impact on the consumers for
The Guardian reported on only one set of transactions. As inflated equipment costs due to higher tariffs is much bigger than
Paranjoy Guha Thakurta detailed in an EPW-The Wire article dated syphoning off the foreign exchange. The consumers have to pay for
14 May 2016, there were many more. According to DRI, the total this – through higher electricity costs, till the capital cost is completely
amount was in the range of Rs. 6,000 crores! The modus operandi paid for, or over the next 15-20 years.
was identical, with the Dubai-based entities playing the same role Recently, Bangladesh, which had recently signed an agreement
and siphoning the money into Mauritius accounts. with Adani power for electricity from its Godda Plant in Jharkhand,
Adani has set up plants in 8 other locations apart from Mundra, has questioned Adani’s price of coal. Though the plant is in Jharkhand,
with a power-generating capacity of 12,450 MW. As DRI documents the coal is from Australia and the landed price of Australian coal in
show regarding his import of transmission equipment, Adani may Jharkhand is $400, far higher than $250 in Bangladesh. This would
have played a similar game with his power plant equipment imports result in a much higher cost of electricity obtained from the Godda
as well. But as compliant governments have turned a blind eye to the Plant than what Bangladesh can produce from its plants from the
over-invoicing of imports by Indian capitalists, this has not come same Australian coal.
under the scanner. This is what Indian big capital has always done.

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Adani Empire and The Hindenburg Report
What role do all of these Adani scams, from inflated capital
costs of imported equipment and costs of imported coal, play in the
larger story of the Adani Empire?
The details can and do fill pages—consider the Hindenburg
Report with its 68 references, as well as the detailed exposures made
by Paranjoy Guha Thakurta and his associates in leading journals
like the EPW, and websites such as The Wire and Newsclick. How
then do we understand the broad picture and why the Hindenburg
report led to a virtual collapse of Adani’s share price with his
companies and Adani himself losing nearly half his wealth? After
all, Adani’s physical Empire is still huge: the Mundra port, the biggest
container port in the country, the Mundra SEZ, a number of power
plants, airports, sea ports, solar power plants, and coal mines in India
and abroad. So why should his Empire be so vulnerable to a short-
seller’s report which explicitly states that he expects to profit from
the drop in Adani’s stock prices?
The answer is that Adani’s Empire is highly “leveraged”. This
means that the huge investments that he is making are from money
that his Empire has borrowed. If it had been raised through the
expansion of stock, selling stocks to people, companies like the LIC,
and mutual funds, then the stockholders would have taken a hit. In
this case, much of his ongoing investments are from foreign bonds.
It is these foreign bondholders who have invested heavily in Adani’s
Empire. With the steep fall in his share prices, it is unlikely that the In the next section, we will take up the Hindenburg Report, and
bondholders will continue to invest large sums, particularly if he the consequences of the specific capitalist path of development that
fails to meet the bond payments. So how does he finance his future India is following. This is not simply crony capitalism, but Modi’s
expansion, without which many of his projects—ports, airports, solar crony capitalists looting the Indian state and its people.
plants, etc—may simply remain as stranded investments?
What will happen to LIC and the banks who have invested large Escape from Law
sums in Adani, even if it is not a significant part of their corpus? It is Time and again, some government investigative agencies have
still huge in terms of money: LIC has invested more than Rs. 30,000 started investigating malfeasance but then nothing has come of it,
crores in Adani which is not exactly chicken feed! The fact that this with cases either strangely getting overturned or dismissed, or just
is a small amount in relation to its total corpus is not the issue. This buried in minutae. Some examples:
is money that belongs neither to the LIC nor to the government; it • The diamond trading scheme was investigated by the
belongs to the policyholders. Directorate of Revenue Intelligence (DRI) and Customs. In 2013 the

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Commissioner of Customs fined Adani Enterprises Rs.25 crore and • In 2019, the Commerce Ministry amended rules that prohibit
oters in top management for smaller amounts. In 2015 the Customs, power plants from operating from within Special Economic Zones
Excise and Service Tax Tribunal (CESTAT) overturned the ruling (SEZs) just weeks before the general elections. Through this method,
and exonerated everybody. The DRI did not appeal against this ruling Adani’s power plant in Godda, Jharkhand became a standalone SEZ
till 2023! and thus got various exemptions and incentives, including the right
• In 2014, DRI found that two Adani companies had grossly to supply power outside the state and to determine tariffs on its own.
overvalued import price of power equipment and then illegally The plant was set up to run on Indonesian coal and was to supply
siphoned off money abroad. This jacked up cost would also have power to Bangladesh. This chage of rules is estimated to benefit the
laid the ground for higher power tariffs being imposed. In 2017, a company by at least Rs.3.2 billion in clean energy cess.
DRI official overturned the findings of the investigation and dropped • Over-riding objections from its own wings, the Modi
all charges. Bizarrely, a different section of DRI launched an appeal government made changes in laws and rules in order to allow the
against this ruling which was dismissed by CESTAT in 2022 and all Adani Group to bid and win control of six airports in India. There
charges dropped. was no public consultation and Adani Group was allowed to bid depite
• In 2016, an investigation by DRI revealed that Adani it having no prior experience in running airports.
companies and several others were involved in over-pricing of coal • An Adani Group company has been given rights to start open
imported from Indonesia and subsequent siphoning off of money cast mining of coal in the middle of dense HansdeoArand forest of
abroad. The Bombay High Court blocked DRI efforts to get Chhattisgarh. This was done by the environment ministry despite the
information from overseas jurisdictions. The Supreme Court matter being contested in the Supreme Court. There have been various
overturned this ruling and allowed overseas investigations. But objections raised on this proposal and local tribal residents even
responses are awaited. alleged that their consent was forged.
Regulatory bodies too have shown a peculiar hesitation in BJP state governments have also been accused of helping Adani
investigating prima facie facts that indicate some irregularities, or at Group in privatising of electricity distribution (eg., Bangalore) and
least risks. The most prominent example of this is the stock market placing orders on Adani for electric meters (recently cancelled by
regulator Securities Exchange Board of India (SEBI) which has not UP state distribution companies).
investigated the unusual rise in share prices or suspicions of effectively Besides reeking of cronyism and thus tainting the much hyped
holding of more than 75% shares by family run firms. Despite ‘Na khaunga, nakhanedoonga’ slogan of Modi, there is a more
knowing that the Adani Group was operating through offshore shell important dimension to all this. The Modi government has been
companies, and that various listed companies were target of DRI carrying out large scale infrastructure development through big
investigations, and reportable information (like related-party corporate houses. It believes that this is the path for India’s growth
transactions, etc.) was possibly not reported, it did not investigate and development. Among the various big corporate houses that have
the Group. lined up with the government to carry out this ‘model’ – and make
super profits in the process – the name of Adani is the most prominent.
Helping Hand to Adani Group It has grabbed the lion’s share of such ‘developmental work’, from
Modi government has eased all kinds of regulations and oversight mining, power generation, to ports and airports, defence production
to help big business in expanding its activities, which has benefitted and even warehouses (ffor grain) and consumer products like cooking
the Adani Group like many others. But in some key matters, the oils etc. Proximity to the Modi government is well known and must
government has facilitated Adani Group’s growth specifically: have played a part in this. But as has now become clear, the whole

14 15
empire is built on irregularities, too much debt and illegitimate jumped up in this golden period from $8.9 billion to $90 billion
practices involving off shore tax havens, family run shell enterprises. according to Forbes’ Billionaire Index (See chart below). In fact, at
Was the Modi government unaware of all these shenanigans when one point in September last year, Forbes ranked him the second richest
everybody else knew, including the government’s own investigation/ man in the world with a net worth of over $150 billion.
enforcement agencies? In which case this would be a collaboration
that would tax everybody’s imagination. Or is it the case that Adani
was given a blank cheque to build India’s infrastructure, by hook or
by crook? In either case what happens when the plug is pulled and
the Adani empire is unable to fulfil its commitment to complete and
run all these ports and airports and grain silos and provide defence
essentials? Has the Modi government pledged the country’s future
development to a sinking ship?

The Hindenburg Fallout

The Adani group of 10 listed companies have collectively lost
about $120 billion of their market capitalisation values at the time of
writing, after continued rout in the Indian stock market. The flagship
company Adani Enterprises had lost as much as 54% of its value in
eight trading sessions since the US based market research and short-
Although in India, there were murmurings among share brokers
selling specialist Hindenburg Research released its report on the
and market watchers, Adani group’s clout and perhaps Gautam
activities of the Adani Group on 24 January 2023.
Adani’s proximity to political power led most analysts and media
To understand what this Report says and why the Adani group
experts to adopt a hands-off strategy. It was only because Adani’s
is under siege after its publication, note must be taken of the fact that
ambitions now extended beyond the country’s borders, with stakes
the Adani group’s shares and hence market capitalisation (the value
in an Australian coal mine, an Israeli harbour and offices abroad,
of all the shares in a company at the prevailing market price)
that the group became part of global attention and scrutiny. This
skyrocketed during the past three years in an unheard-of performance.
naturally attracted more probing and much more diligent digging into
Over this period, the combined market capitalisation of the seven
the way this group was flourishing. One outcome of this is the report
firms that bear the Adani name jumped from a little over $30 billion
by Hindenburg Research, which is a small US-based company that
to over $218 billion, a 7-fold rise!
specialises in exposing corporate fraud and playing the stock market
Remember, these were pandemic years when the people were
in order to profit from falling share prices (‘short selling’). Many of
devastated not only by Covid-19 but also recurring lockdowns and
Hindenburg’s previous such exposes have ended up with regulators
restrictions. Although across the world and in India, big business has
taking action against the firms investigated.
generally reported astronomical profits during the pandemic, Adani
group’s performance stands out as breathtakingly exceptional. While
What the Hindenburg Research Report Says
government apologists and cronies were celebrating these results,
The 98-page report, titled “Adani Group: How The World’s 3rd
increasing international scrutiny was drawn to this phenomenon as it
Richest Man Is Pulling The Largest Con In Corporate History”, details
was happening. Gautam Adani’s personal wealth too, naturally,

16 17
evidence of stock manipulation in Adani group companies in order regulations stipulate that promoters (owners) can hold only up to
to boost their share prices, use of secretive offshore shell companies 75% of shares in any listed company, with the rest 25% shares being
to route funds, and of accounting irregularities. It also points out the available for public holding. This is to minimise the possibility of
laxity shown by the Modi government’s law enforcement agencies the promoters rigging the prices. Four of the Adani Group companies
towards palpable and reported violations of financial regulations by Adani Transmission, Adani Power, Adani Enterprises and Adani Total
the Group. It concludes that the companies are financially precarious Gas have promoter holdings of between 70% and 75%. In each of
and dangerously “over-leveraged” (meaning their debt burden is these, offshore funds based in Mauritius, notorious for its opaque
unsustainable given their financial situation). The main findings of business practices, have holdings ranging from 3.3% to 10.3% that
this report are summarised below. the report says should really be treated as belonging to the Adani
Group itself. If these are added to the official holdings of the group,
Empire Built on Several Scams the 75% threshold would be crossed in each case. With 90% to 100%
The Hindenburg report gives details of a series of import-export of each of these offshore funds’ investments only in Adani stocks,
scams in diamonds, iron ore, power equipment and coal, some of they really seem to be funds controlled by the group and not genuine
which have also been described earlier in this booklet. It is these that third-party entities. These funds seem to be just stock parking entities
provided the foundation for Adani’s empire. Investigation into these for the Adani Group companies to enable them to remain below the
scams has been stonewalled by the government. 75% threshold and avoid delisting.
The report also alleged that their investigations revealed
Steeped in Debt “numerous undisclosed related-party transactions by both listed and
Five out of the seven listed companies bearing the Adani name private companies” which would be a violation of regulations. Under
have more short-term (typically one-year) liabilities than their liquid stock market regulations that govern listed companies, any transaction
assets. This denotes a precarious financial condition usually denoted with a ‘related party’ i.e., a firm that has organisational links with the
by the term ‘current ratio’ of less than 1 ranging from 0.2 to 0.9. A other, must be reported to the regulator through a disclosure filing.
ratio of more than 1 indicates that the assets are more than the Hiding such transactions is illegal. The report claimed that it had
liabilities while a ratio of less than 1 means liabilities outweigh assets. unearthed facts on how “a Vinod Adani-controlled Mauritius entity
The Chief Financial Officer (CFO) of Adani Group recently told with no signs of substantive operations lent INR 11.71 billion (U.S.
CNBC-TV18 that the Group’s total debt stood at $30 billion out of $253 million at that time) to a private Adani entity which did not
which $9 billion is to Indian banks. A report by global accounting disclose it as being a related party loan”.
firm CLSA, quoted in the same report, broke down the total Adani
Engineering Accounts by Using Offshore Shell Network
debt as: 38% bank debt (term loans, working capital and other
These devices give the Group illegitimate control and leverage
facilities); 37% bonds/commercial papers; 11% financial institutions;
for stock manipulation including “wash trading” in Adani stocks –
and 12-13% inter-group lending.
buying and selling the same stock in intra-day trading to artificially
boost the trading volume of the stock to fool lay investors into
Evading Regulations by Using Shell Companies
believing it is much in demand. The report alleges that these offshore
How did shares of Adani Group’s listed companies reach such
firms are used to “engineer” the accounts of Adani group companies
astronomical heights? The answer can be found in some of
by boosting cash flow or profits, “cushioning capital balances in order
Hindenburg’s revelations of how Adani companies managed their
to make listed companies appear more credit worthy” or simply to
accounts to show a much better performance than actual. Stock market

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move funds around amongst various group companies. Adani’s younger brother, Rajesh Adani, and his brother-in-law Samir
The report alleges that the “offshore shell network” seems to be Vora are in top management positions in group companies and in
used for earnings manipulation. As an example, it cites a series of offshore entities. Like Vinod Adani, both have in the past been charged
transactions where “assets were transferred from a subsidiary of listed by the authorities with serious fraud and arrested. Such a track record
Adani Enterprises to a private Singaporean entity controlled by Vinod should have disqualified them from holding any responsible position.
Adani, without disclosure of the related party nature of these deals. On the contrary, they have been elevated to the top.
Once on the books of the private entity, the assets were almost Adani group companies have seen a rapid turnover of chief
immediately impaired, likely helping the public entity to avoid a financial officers (CFOs), an indicator that there is something awry
material write-down and negative impact to net income”. with the firm’s accounting practices. Adani Enterprises, for instance,
has had 5 CFOs in the last eight years. The independent auditors,
Suspect Antecedents of Key Management Personnel mandated by law, for such a large corporate entity seem unbelievably
Is it possible to carry out such largescale accounting shenanigans small. For Adani Enterprises, the flagship of the Adani empire, and
in a conglomerate the size of Adani’s? What about auditors and the Adani Total Gas, it is a firm called Shah Dhandharia and Co, which
companies’ own financial officers? The Hindenburg report says that has no website, just four partners and 11 employees. Two of the
the Group is characterised by family control over all key operations partners in this auditing firm who signed off on the financials of
across the Group and weak accounting structures. The implication is Adani companies were 23 and 24 years old, unthinkable for someone
that personnel were potentially complicit in everything. auditing such a large and a complex group.
The CEOs and MDs of some of these FIIs have been implicated A sense that something was rotten in the state of Adani group’s
in multi-billion dollar scams in the past, like the 1MDB scandal companies was perhaps available with investors who were more risk-
involving the Malaysian company charged with money laundering averse. Private equity funds have steered clear of holding stocks in
and fraud. One of them also has a close link with Ketan Parekh, the several group companies knowing that they are artificially over-priced.
notorious stock market manipulator who has been banned from India’s No Indian mutual fund owns even 1% of the shares of Adani
markets. Enterprises, Adani Green Energy, Adani Total Gas or Adani
There is direct family control over most of these secretive Transmission.
offshore companies. Vinod Adani, elder brother of group Chairman
Gautam Adani, controls 38 Mauritius based companies that appear Fire Fighting by Indian Corporates and State
to be pure shell companies with no evidence of any business The Hindenburg report, released on 24 January, caused a
operations or employees. They are registered at the same address, in meltdown in Adani stocks whose ripples are now spreading far and
several cases on the same day, and many have websites that are like wide. On 26 January, Adani Group denied the report’s allegations
cut-pastes of each other. The Adani group insists that Vinod Adani calling them maliciously mischievous. A previously scheduled
has no connection to them beyond being a shareholder. However, Follow-on Public Offering (FPO) of the group began on 27 January,
these companies controlled by him have moved billions of dollars offering new shares to the public. It received a very indifferent
into Adani group companies without disclosing them to the authorities response from buyers, indicating that the Hindenburg report had found
as related-party transactions. These funds are then used to dress up resonance. On 29 January, Adani Group released a 413 page ‘rebuttal’
the financials of the Adani companies to make them seem of the Hindenburg report, calling it ‘false’ and ‘misleading’. It also
creditworthy and enable them to get debt against their stock. Gautam tried to take cover behind nationalism by saying that the report was
an attack on India itself. Hindenburg dismissed the Adani rebuttal

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and claimed that Adani group had responded in generalities and exposure to Adani debt.
deflections to only 62 of the 88 questions it had posed to them. There are international reverberations too: Credit Suisse and
Citigroup, two global investment banks have said that they would no
Corporate White Knights longer accept securities issued by the Adani Group as collateral against
By this time, panic was setting in in corporate boardrooms in margin loans.
India. There appeared to be a sense that Adani was too big to fail,
which also connotes recognition of the fact that he is close to PM LIC and Public Sector Banks’ Exposure
Narendra Modi, and hence has immense clout. On 31 January, the Life Insurance Corporation (LIC), the government owned
FPO closed with 1.12 times over subscription. The FPO was saved insurance giant, declared that it had bought 5% of the $736 million
from utter failure by several Indian corporate entities buying up shares anchor portion of the FPO offering, but it also declared that it would
on offer on the last day, apart from the massive $400 million invested buy no more Adani shares. LIC already owns 4.23% of Adani
by the Abu Dhabi conglomerate IHC. Reports suggested that JSW Enterprises, besides having a 9.14% stake in Adani Ports and a 5.96%
Steel and Bharti Airtel were some of the corporate buyers that came stake in Adani Total Gas, according to reports. On 30 January LIC
to its rescue. While the floor price for the FPO was Rs 3,112 per had to issue a press statement declaring that the total market value of
share, the company’s stock was selling for Rs 2,975 on the Bombay its Adani linked shares was Rs. 56,142 crores as on 27 January 2023,
Stock Exchange that same day. Thus, anybody paying nearly Rs 140 which was less than one percent of LIC’s total assets under
more to buy the same stock makes no economic sense. Clearly, the management at book value. However, since LIC reportedly lost about
corporate entities had other reasons to subscribe. Interestingly, the Rs.16,580 crore in the first five days of the stock market rout of
portion of shares reserved for retail individual investors received only Adani shares, concerns have been growing that it needs to be protected
12% subscription while the portion reserved for employees of the from any further erosion. LIC has 25 crore Indian policy holders and
Group got just 55%. That means that in both these categories, the these are sustained by LIC’s investments in stocks, among other
shares largely went unsold, reflecting the scepticism of the common avenues. SBI and its arms have also invested. SBI said on 3 February
man in the companies’ prospects. that it’s total exposure to Adani Group stood at Rs. 27,000 crore.
The most fascinating nugget of information that appeared the Once again, SBI money is really the money of millions of individual
next day courtesy Forbes, was that two of the companies that are deposit holders. If the Adani group or some of its components
named in the Hindenburg report as offshore entities associated with implode, a lot of this public money would be lost. It is no coincidence
Adani group’s stock parking and funds routing system were likely to that when the stock markets reacted to the Hindenburg report, it wasn’t
have helped in buying up the shares. They were declared as just the group companies that saw their stock prices in free fall, but
underwriters to the FPO officially. banking stocks as well.
The FPO was cancelled on 1 February with Adani saying that it
wanted to protect investors’ interests, referring to the fact that share Full Independent Probe Needed
prices in the market were well below the prices at which FPO sales It is indicative of the seriousness of the ongoing Adani stock
took place. This move added fuel to the panic, with the brutal rout fall and related developments that Parliament proceedings were
continuing in the stock exchange. So much so that the stock regulator disrupted for two days as Opposition MPs demanded a full discussion
SEBI reportedly started an investigation into it and RBI was reported and the setting up of a Joint Parliamentary Committee (JPC) to
to have sought information from banks regarding extent of their investigate the whole affair. Finance Minister Nirmala Sitharaman

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tried to douse the flames by saying that India’s macroeconomic
fundamentals and “economic image” has not been affected by the
withdrawal of Adani FPO. Regarding accusations of stock market
manipulation by Adani group, she asserted that the regulator SEBI
has the “wherewithal” to ensure stability in markets. Earlier, Union
Finance Secretary T V Somanathan had already declared that the
whole thing was “a storm in a teacup” and “fluctuations come and
go”.
What this means is that the Modi government is playing down
the issue and also indicating to its financial regulators that there is
nothing to be done as of now. This is a dangerous if not callous
attitude in the face of mounting evidence over the years that the Adani
group may have committed illegalities and malfeasance. Although at
present it is being said that State-run banks and LIC have limited
exposure to the Adani Group, there is enough past experience to
show that stock manipulations, offshore shell companies, round-
tripping and too much debt is an incendiary combination that will
more often than not lead to a collapse of the house of cards. Adani’s
much flaunted proximity to the Modi government and the Group’s
consequent involvement in key infrastructure projects ranging from
ports, airports, warehouses, mining, power generation etc., means
that the contagion from the ongoing share price collapse may lead to
an escalating crisis in the group since it is resting on huge debt. Public
money is involved, and so are key infrastructure components. Adani
even has a defence The country can ill afford to play ducks and drakes
in this scenario. It is rightly feared – and evident from the current
tamping down - that the Modi government is trying to hush up the
matter, including the fact that its financial regulators and enforcement
agencies have been complicit in allowing the alleged violations and
fraud to continue over the years.
Hence the CPI(M) reiterates its demands that the Adani Group’s
alleged violations, the causes of the present stock market turmoil
and all related issues – including the role of financial regulators and
enforcement agencies – should be investigated by a JPC.

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