Inner story of rise and fall of Adani empire


‘‘Na Khayunga, na khane dunga’’ (Neither shall I amass ill-gotten wealth nor allow anyone to do so)—that was what PM Modi told the countrymen before election. Now, like all other promises of his, this too also, in the language of his Home minister Amit Shah, proved to be a ‘jumla’ (gimmick). With the secret behind the phenomenal rise of monopolist Gautam Adani during his regime now unravelled by research agency Hindenburg, Modi is visibly unnerved as is evidenced from his desperate attempt to override the allegation of his closeness with Adani by peddling in self-eulogy and providing a list of his ‘achievements’ which, we all know, have wreaked havoc in people’s life.

Phenomenal rise of Adani

Adani Enterprises, according to some economic commentators, were chosen by the Modi-led BJP government as ‘‘national champion’’, that encouraged its expansion into a clutch of critical sectors of the country and helped it gain substantial footing overseas notwithstanding the fact that financial underpinnings of the group were opaque—like its quicksilver pace of growth despite the absence of cash cows (a business investment, or product that provides a steady income or profit like i-phone of Apple group) in the group. Shadowy investors, charges of stock-price manipulation, and a thick density of, what is called, related-party transactions marked the business transactions of the enterprise. Average growth of Adani’s wealth in last three years has been mind-boggling 819%.
In 2013, Economic Times profiled Gautam Adani, recalling his early days—importing plastic granules from Gandhidham; upgrading into wider trading; and then backwards integrating into Mundra port—and his consequential alliance with then Gujarat chief minister Narendra Modi. He then openly lent support to Modi government. From there, his ascent as a monopolist tycoon began and reached a pinnacle before recent unravelling of a host of frauds and irregularities in these business operations by US-based Hindenburg, an investment research firm. Earlier, in August 2022, American finance and insurance company Fitch Group had warned that the group had taken on too much debt and raised the possibility of a default ‘‘in the worst-case scenario’’. In December last, Quartz, another fact-finding media, observed that any default by any Adani company would damage not only the stock market but also wreck the Indian economy. The taxpayer would be hit, additionally, by their indirect exposure to the group, through LICI and the state-owned banks, it pointed out. ‘‘A bailout would limit the damage. That too would be funded by the public exchequer, but it would be unavoidable if the government decides that the Adani Group has indeed grown too big to be allowed to fail,’’ it added further. So, it is not that whistleblowing was absent. Yet Modi government remained unfazed and went on providing all possible help and benefits to Adani group.

Adani’s meteoric climb is squarely attributed to his bonhomie with Narendra Modi

Even a man in the street also understands that this miraculous rise of Adani enterprise could not have been possible but for full scale backing of the ruling BJP government. Adani himself said that the profit levels for his group is growing twice at the rate of debt from the last nine years. Notably, hitherto the BJP PM was vending dream of 5-trillion economy to the countrymen as if that would bring all prosperity to them. Of late, it has been Adani who was batting for the PM who has not fulfilled a single promise of his till today. Gautam Adani exuded confidence a couple of months back that India will be the third-largest economy in the world before 2030 and the second-largest by 2050.
In fact, meteoric rise of Adani Enterprise for last two decades, particularly after Modi-led BJP government had taken over the rein of the country in 2014 surprised one to all. Gautam Adani, the chief of the enterprise, was a college drop-out who began importing basic polymers for small-scale companies in 1985. When Modi took charge as chief minister of Gujarat in 2001, Adani Enterprise saw meteoric growth in the state. It was awarded the contract to set up a highly modernized port complex at Mundra. On the other hand, it got government largesse, as described in multiple CAG reports; the Special Economic Zone (SEZ) at Mundra came up without an environment clearance; rival ports like state-owned Kandla were made to adopt a series of decisions which hurt them but benefitted Mundra. Such instances are not in short supply.
By the time Modi became PM in 2014, Adani’s was big empire with net worth of estimated US$7 billion. In 2013, most of the group’s assets were located in Gujarat. Six years later, it has straddled most parts of India. Adani’s rapid diversification started around 2015. When Modi pledged to develop the local manufacturing of defence equipment, he quickly built the capacity to supply military hardware to the military by partnering with defence contractors. Between 2014 and 2017, the Adani Group acquired projects like Lanco’s Udupi thermal power project and L&T and Tata’s Dhamra port in Odisha. Now 13 important ports are at the disposal of Adani. Even when the National Investigation Agency (NIA) had busted a massive drug racket at Gujarat’s Mundra port in last September and seized nearly 3,000 kg of heroin which were supposed to be trafficked to other parts of the company, the government took no action against the Adani group managing that port. PM Modi did not utter a single word. Rather, Adani went on expanding business in new areas—wind energy, solar manufacturing, lending, power distribution, and aerospace and defence. In September 2017, it tied up with Saab, the Swedish defence giant, to make unmanned aerial vehicles and helicopters. In September and October 2018, the Modi government awarded 126 contracts to Adani firms to set up and operate piped natural gas networks and fuel stations across India. In 2014, Adani’s wealth was $800 crore (Rs 65,600 crores). It rose to a whopping $14,000 crores (Rs 11,48, 000 crores) in next 8 years Expressing his gratitude to PM Modi, Adani said that his is a ‘‘visionary and inspirational leadership to India…. He has not only brought policy changes but also changes to schemes that directly touch the lives of every Indian. There is hardly any aspect of governance that he has not touched. He is trying hard to bring transformative changes not only in the Indian economy but also pushing for social transformation and inclusive growth.’’ This showering of effusive praise on Modi is obviously a reciprocation of the favours Adani has received from him. To refute allegations about his rise being due to Modi’s patronage, Adani cited how the decision of economic liberalization by the Congress had helped him. Yet, obvious truth remained obvious.
With his wealth multiplying exponentially, Adani decided to diversify his business in various other sectors. Even the then Congress-led union government played along as well, taking the environmental violations at Mundra port as a fait accompli meaning indulgence in Adani’s breach of rules to enlarge business. Of late, Adani had bagged order for setting up a port in Kerala with full support of the CPI (M)-led government there. It also signed an agreement with the TMC-led West Bengal government for setting up a port in Tajpur and coalfield in Deucha Pachami.
The Adani group is also benefited from other government decisions. One instance is Adani’s power project at Godda, Jharkhand, where existing laws regarding ownership of forest lands by tribals were tweaked. Another instance is the claim by a Sri Lankan power official that Modi had asked Gotabaya Rajapaksa, the former Sri Lankan president to award a project to Adani. Third instance is that after a trip of Modi to Israel, Adani had rushed there and bagged 90% of India-Israel trade. A fourth instance is awarding maintenance contract of six airports to Adani by changing rules. In order to ensure that Adani bagged mining contract in Australia with bank finance, the then SBI chairman was flown to that country and then a loan of Rs 8,200 crores was instantly granted. On the other hand, Australian people staged a protest at Adani’s Carmichael coal project’s rail corridor challenging the water use plan of the project that entails pumping water from the Suttor River. One of the protestors chained himself to the cattle grid along the road near the railway corridor attached to the project to stall work. Yet Modi remained an indulgent onlooker to Adani’s unfair trade practices abroad. In fact, Modi began relying more on Adani, using the group to meet India’s ventures in decarbonization. The group forayed into drones, polysilicon, and now in cellphone business. Also Modi reportedly prevailed upon Bangladesh to get a project there. In reciprocation, among other things, Adani welcomed Modi to travel in his personal jet for electioneering. It is also not known how much Adani has contributed to the most opaque PM Care fund or electoral bonds in favour of the BJP. Because these are all closely guarded secrets.

Revelations in Hindenburg report

But then, cold water was poured on the blazing fire. On 24 January 2023, Hindenburg’s report was published, and everyone was dumbstruck at its findings. The report alleged that Adani was pulling off the ‘‘largest con in corporate history’’. It claimed Adani conglomerate has been involved in stock manipulation, accounting fraud, money laundering and an improper use of offshore tax havens over the course of decades. It also raised concerns about high debt and the valuations of seven listed (see box) Adani companies. As per the report, out of Adani’s reported wealth of Rs 9,79,800 crores, around Rs 10, 000 crores came through price manipulation and artificial escalation of share prices in last three years. Main part of the revelation is that Adani group has many shell companies (see box) in various tax havens like Mauritius (see box) which had invested heavily in Adani group shares in India to jack up the prices. In other words, Adani group’s own money has been recycled through Mauritian route to artificially hike the share prices. Then Adani group pledged those ‘overpriced’ shares with various lending entities to borrow money. This was nothing but fraud. Adani threatened Hindenburg with legal action, but the latter retorted by daring him to do that. ‘‘Adani failed to specifically answer 62 of our 88 questions’’, said Hindenburg. It also alleged that Adani enterprise has huge debts. Experts say that out of the Rs 2 lakh crore total reported debt of Adani Group in FY22-23, bank loan amounted to Rs 70,000—80,000 crore. In August last, Credit Sights, Fitch Group’s debt research unit, had said that the Adani Group is ‘‘deeply over leveraged’’ (meaning having very high debts), and may, ‘‘in the worst-case scenario’’, spiral into a debt trap and possibly default.
Hindenburg further alleged that Adani had intentionally so structured the pseudonym shell companies and funds as to conceal ultimate beneficial ownership. In a series of transactions assets were transferred from a subsidiary of listed Adani Enterprises to a private Singaporean entity controlled by Vinod Adani, without disclosure of the related party nature of these deals, the report pointed out. Adani enterprise is also accused of creating fraud import/export documents to generate fake or illegitimate turnover and to siphon money from the listed companies.

Other manipulations by Adani group

Dubious operations of Adani group have been in other areas also. Most of us have heard of Harshad Mehta and how he committed one of the largest financial scams in the history of the Indian stock market. He was a master manipulator, and his influence over the stock market and other institutions helped him rig share prices. Another of his mentees, Ketan Parekh, pulled off another infamous and ruthless scam that completely shook the markets. Government agencies have estimated that the extent of the fraud could be up to Rs 40,000 crore! Way back in 2007, Securities and Exchange Board of India (SEBI) which regulates stock and money market operations, ruled that the Adani promoters aided and abetted Ketan Parekh in manipulating the scrip of Adani companies. The companies were initially penalized with bans, but later penalty was reduced to fines. The Hindenburg investigation showed that 14 Adani private entities transferred shares to entities controlled by Parekh who then engaged in market manipulation on those shares. It is also alleged that a close relative of Gautam Adani, who is Adani’s legal adviser is also on the Board of SEBI. He used to supply secret information in advance about probable future price movements of shares to Adani. This illegal practice is known as ‘insider trading’. Further, the Panama Papers scandal unfolded in April 2016 which exposed the network of more than 214,000 tax havens involving people and entities from 200 different nations. Another scam known as Pandora Papers surfaced in 2021 where nearly 12 million documents incriminating hundreds of global politicians and wealthy elites for tax avoidance and corruption were leaked.
Of late, following Hindenburg report, France’s Total Energies has put hydrogen partnership with Adani on hold. The turmoil in Gautam Adani’s empire is spilling over to Japan, where major asset managers like Nomura Holdings and Sumitomo Mitsui DS are stepping up disclosure over mutual funds with exposure to the group in response to jittery investors. Yet, neither the government nor the regulators were least bothered. No CBI, ED or Economic Offence wing was swung into action. Recently, the Finance Minister sought to make a face saving by claiming that regulators like SEBI and RBI are always alert. But unfortunately, there is no taker of her dubious claim which only made her a laughing stock before the world.
So, it is clear how the speculative operations, unfair trade practices and exploitation of legal lacunae that capitalism-imperialism in its decadent moribund stage abets liberally, come handy for the monopolists tycoons to pile up their riches by exploiting the oppressed millions. While a petty thief, if caught, is meted out punishment for breaking the law, the industrial tycoons and multi-nationals who amass fabulous wealth by large-scale stealing is allowed to go scot-free and eulogized as wealth-creators. The eerie silence on the part of the BJP government over such an allegation of mega-fraud is a mark of their discomfort over the revelation.

Fall of the empire

If it is a vertical take-off, there has to be a nose-dive landing. This proverbial saying aptly describes the rise and fall of Adani group. After becoming the richest Asian following sky-high value of the shares of his enterprise, Adani decided to issue 20,000 FPOs (Follow-on Public Offer) on 27 January 2023 to raise more money from the market to fund his ambitious capital expenditure plans and repay a part of the huge debt pile. FPO is a process in which an existing company listed on the stock exchange issue new shares to the existing shareholders or to the new investors. It is different from an Initial Public Offering (IPO) where the company issues its shares to its public for the first time to collect funds in order to grow their business. But with Hindenburg report in public domain on 24 January, share prices of Adani group started tumbling at a rapid pace and 50% of market value of Adani group’s shares was wiped off in just three days. In terms of value, this loss of about $120 billion (Rs 9,84,000 crores) roughly which is equivalent to India’s annual infrastructure budget. Following that, response to FPO was abysmally low. Only 3% was subscribed. But then Adani’s friends and presumed accomplices-30 institutional investors including Abu Dhabi Investment Authority (ADIA) and domestic investors such as SBI Employee Pension Fund, HDFC Life, Life Insurance Corporation of India and SBI Life-came to his rescue and invested in the FPO to make it fully subscribed. But Adani Enterprises had called off its Rs 20,000-crore FPO after a day by arguing that in the unprecedented volatile share market, it would not be ‘‘morally’’ correct to retain the FPO money. Surely, it has been a regressive step out of panic. Because Adani could sense that the FPO shares, on listing, would be quoted much less than their issue price sending further wrong message to his investors. Moreover, Adani had promised to release the shares pledged for obtaining loan of Rs 9,200 crores in advance to pay back loans. Obviously, questions are raised that if Adani had enough money, why did he opt for taking fresh loan? In any case, after years of booming valuations that propelled Gautam Adani to become the world’s second richest person, a steep fall in the prices of shares of his companies, his position overnight slid to 16th.

Impact of this drastic fall on investors and people

The hand-holding of the government with Adani is also evident from another fact. Normally, the mutual funds who collect money from common people, invest the corpus mostly in tradeable stock and debt instruments and seek to increase fund holder’s investment by that. They normally pick up high-growth shares. But their exposure to Adani group is negligible. It prompts one to conclude that the fund managers of the mutual funds have been so evasive about Adani shares because they had doubt about stability of the Adani group and its doubtful market operations. If the mutual funds were so apprehensive, how is that SEBI had no inkling of any suspected irregularity? On the other hand, LICI which, as everyone knows, are extremely risk-averse and do not normally park their funds in shares. But LICI’s total holding under Adani group of companies is stated to be around Rs 77,000 crores. That has now been reduced to Rs 53, 000 crores because of fall in share price. The total purchase value of equity share, bought over the last many years, under all the Adani group companies is Rs 30,127 crore and the market value for the same as at close of market hours on 27 January 2023 was Rs 56,142 crore. Similarly, exposure of State Bank of India, the country’s largest lender, to the group is around 81,000 crores. Now its value stands at Rs 54, 100 crores. State-owned banks have lent twice as much to the Adani group as private banks, with 40 per cent of their lending being done by SBI. How could this happen if government intervention, if not insistence, is ruled out? Were both RBI and SEBI blind-folded or simply nodded to the desire of the ruling party and PM? Now, if, as alleged, the Adani Group had artificially inflated the value of its stock through manipulation, and then raised funds by pledging those shares, LICI and banks such as SBI could face heavy losses in the event of a fall in the prices of those mortgaged shares. This would expose few crore Indians who have poured their savings into LIC and SBI to immense financial risk. Over and above, the general loss (already incurred by common investors in shares because of the crash in Adani stock prices) is estimated to be about Rs 4.18 lakh crores.

Corrupt nexus of government-industrialist

It is once again proved that the government of India is ‘‘by the monopolists, of the monopolists and for the monopolists’’, as our Party has been repeatedly saying over the years. Corruption, scam, scandal, fraud, cheating, money swindling, embezzlement of public fund, forgery, manipulation, manoeuvre—these are the hallmarks of dying capitalism today. Whether it is the BJP or the Congress, or any other power-monger bourgeois party, anyone subservient to bourgeois class interest and aspiring for power by currying favour with the ruling monopolists is bound to be a partner in such crimes and corruption. Financial oligarchs have been making their fortunes by installing their pliant governments whose helmsmen are virtually on the pay-roll of theirs. So, they remain unscathed of anything and everything immoral, unethical, unscrupulous, and dishonest. Adani episode attests that truth once more. Adani himself said that he was also helped during the Congress rule. In fact, this ruling party-monopoly house nexus was seen earlier also. When, late Pranab Mukherjee, former President of India, was the finance minister in the Congress government, it was alleged that he heavily favoured the Ambanis to grow as a giant industrial house. That time, Ambani had also backed the Congress. But later with the Congress being discredited because of various scams and scandals, he shifted affinity towards the BJP. It also came to light that the BJP government with the French President as the mediator had finalized deal to Rafael aircrafts at much higher prices and also agreed to channel the bulk of the Rs 30,000 crore for being invested in a joint venture between Dassault Reliance Aerospace, a 49:51 joint venture established between Dassault and industrial tycoon Anil Ambani’s Reliance Aerostructure. Everyone was surprised to find that the BJP government, instead of government owned Hindustan Aeronautics Ltd. (HAL), preferred to partner with monopolist Anil Ambani when nearly all of the companies run by him were in serious debt. Moreover, Anil Ambani’s Reliance Aerostructure had no past experience and expertise of manufacturing aerospace and defence equipment. In fact it had only acquired a piece of land to construct the factory. Notably, the Anil Ambani group’s infrastructure divestment plan of Rs 18,000 crores was in favour of the Adani group.
If one looks at other countries, the same feature would be noticed. Lockheed Martin, the largest private military contractor, had booked more than $950 million worth of its own missile military orders from the Pentagon, in part to refill stockpiles being used in Ukraine. The Army has awarded Raytheon Technologies more than $2 billion in contracts to deliver missile systems to expand or replenish weapons used to help Ukraine. Similarly, UK established way back in 1998 the Privatization of Security programme, to jot down modalities for placing orders for military hardware to private and security and military companies. Dassault Aviation, Naval Group, Airbus Group, MBDA, Nexter, Safran and Thales are the France-based defence manufacturers who regularly receives order from French government as well as overseas buyers. Russia’s invasion of Ukraine and the German government’s subsequent commitment to vastly increase military spending has suddenly turned Thyssenkrupp Marine Systems (TKMS), financially-troubled German private defence company into an asset. While people are dying in war, private companies are having a heyday with support of their respective imperialist-capitalist governments now on a privatization spree. This industrial-military complex is also an example of close interconnection between an imperialist-capitalist state and private business houses. While the companies are allowed to make fabulous profit in league with the bourgeois government, the latter in turn benefits, both politically and economically, because of this unholy alliance.

People’s consciousness need to be awakened

Under such circumstances who can remain insulated from corruption and crime in imperialism-capitalism? Obviously, those who engage themselves relentlessly in conscious and continuous fight against capitalism, the root of the evils, stand the chance of keeping themselves away from such offences and wrongdoings. Be that as it may, the virulent spate of corruption and crime demands immediate united action from all right thinking people. They also need to understand that the vote-based political parties from their ulterior motive of serving the ruling capitalist class and shielding the worn-out capitalist system from being exposed as the cause of all maladies and miseries of the people, have been misguiding them with false promises, diverting attention from the real cause, deceiving with jugglery of words and confusing them by distorting facts.
In this decadent moribund capitalist set-up, no enquiry will find its desired end, until and unless people stand vigilant. So, any and every democratic minded person, need to take it into their heart that there must develop in the society an ambience which would stand resolutely against growing corruption and crime. Only such an ambience can act as the bulwark against these worst enemies of mankind. So conscientious people must speak out and raise their voice and even take the initiative-individual and collective-for creating the political atmosphere conducive to growth of an organized united sustained powerful movement based on higher culture and morality under a correct anti-capitalist revolutionary leadership. Here lies the importance of a genuine revolutionary party.
It ought to be realized that under capitalism, only means to contain erupting corruption at every sphere is to build up and strengthen one after another well-knit democratic movement on the burning issues of life under genuine revolutionary leadership which alone will constitute a bulwark against the invading corruption in every field. Otherwise, Adanis would reign supreme, oppression and repression would assume more and more dimension and the servitors of the Adanis-Ambanis would continue to thrash with more virulence. Options are not many. Only two are there-either the country will take the road of freedom and progress or it will suffer the ignominy of fascist autocratic slavery. Seize the time still left.

What is Secondary Stock Market
When a company raises funds by issuing fresh stocks or equity shares, it is called initial public offering (IPOs). After the shares are subscribed by various investors—big, medium and small-those are listed on stock exchanges for being traded (i.e., changing hands from one to another through buy and sale) in the secondary market. When we speak of share prices, we mean the price at which it is being traded just like any other item of use in the normal markets. Wealth is calculated by multiplying the number of shares listed by the price of those shares on a particular day. This is called market capitalization.
For example, if the number of listed share a company is 2,000 and those are selling at Rs 50 (market price) on 15 February 2023, then market capitalization of the company would be Rs 1,00, 000 (2000×50) on that date. Price of a share goes up if there is demand for it and tumbles when the demand falls. Moreover, as inflation is defined in classical bourgeois economy as too much money chasing too little a goods, similarly, if more and more money is pumped into the secondary market to chase fixed number of listed shares at a given point of time, share prices on average would go up. And who does not know that idle capital being unable to find avenues for productive investment due to shrinkage of market endemic of the crisis-ridden capitalist system, is entering speculation on a growing scale. So, stock market indices which indicate average value of the shares go up. The surging share market price in India and other countries is a resultant of that. It has nothing to do with the economic growth or prosperity of the people of a country.

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