16 November 2023
Last week, Indian multibillionaire Gautam Adani’s conglomerate announced that the United States will invest $553 million in an Adani Group port project in Colombo, Sri Lanka. The deal makes strategic sense: The funds will come from the U.S. International Development Finance Corp. (DFC), which aims to counter and provide alternatives to Beijing’s Belt and Road Initiative in the Indo-Pacific.
China’s assets in Sri Lanka include a 99-year lease signed in 2017 for the port in Hambantota. In principle, the Adani port project could serve as a powerful contrast to the Chinese investment, which has proved controversial due to concerns about sovereignty. Adani, one of the most powerful men in India, also makes for a useful partner: He has close ties to the government in New Delhi, a critical U.S. friend in the Indo-Pacific.
The DFC investment deal delivers a big boost to the Adani Group in the wake of a major scandal. In January, U.S. investment research firm Hindenburg Research accused the conglomerate of committing massive fraud for decades, allegations that the Adani Group vociferously denied. In part because of their severity, the allegations made headlines around the world, with extensive speculation on the impact the accusations would have on both Adani and India’s financial industry overall.
Speaking last week, Karan Adani, Gautam Adani’s son and the CEO of Adani Ports and Special Economic Zone, heralded the new deal for the Colombo port project as a “reaffirmation by the international community,” likely referring to other countries’ continued engagement with Adani, despite the fraud allegations. But the Adani Group has been resilient all along, weathering the Hindenburg allegations and more recent challenges—including fresh fraud allegations—while making new deals and investments.
Last month, the Adani Group inked a $3.5 billion refinancing package from 10 international banks, signaling the support it still enjoys from lenders. In August, the company announced that it was taking over a top Indian cement-maker, Sanghi Industries. Shares of key Adani Group companies, including flagship firm Adani Enterprises, have rebounded in recent months.
The most visible signs of Adani’s resilience lie in India’s clean energy sector. Last month, news emerged that the company was targeting $4 billion in green hydrogen investments. In July, Adani Green Energy released figures showing strong performance in the first quarter of fiscal year 2023-24 (which in India runs from April to June), including a 51 percent year-on-year rise in consolidated net profits.
In September, Adani Green Energy, which in June claimed to be India’s largest renewable energy producer, revealed a $300 million deal with French energy giant Total for joint investment in the Indian solar and wind sectors. Adani has even announced investments in coordination with rivals. In March, executives from the Adani Group and Mukesh Ambani’s Reliance Industries said they would both boost solar power capacity in Andhra Pradesh state—although not through joint investments.
These achievements are notable given the serious damage inflicted on the company in the days immediately following the Hindenburg allegations. Shares and stock prices of Adani’s companies plummeted, pending sales were canceled, and credit rating agencies downgraded their outlooks. Gautam Adani’s personal wealth plunged by nearly half its worth, from $120 billion to $61 billion.
In the months since, the Adani Group has also confronted new obstacles. In August, Deloitte resigned as auditor of Adani Ports due to concerns related to the Hindenburg allegations. October was especially rough. The Financial Times reported that the conglomerate had purposely inflated fuel costs and over-invoiced millions of energy customers, which the Adani Group denied. India instituted transparency rules for foreign investors deemed “high risk”—a move described by some Indian business reporters as linked to the fallout from the Hindenburg allegations.
Also in October, New Delhi Television, for which Gautam Adani became the majority stakeholder last December, acknowledged a 51 percent decline in profits for the second quarter of FY 2023-24. The news came days after a United Arab Emirates-based firm announced that it was selling its stakes in two Adani companies. Reportedly, neither of these developments was tied to Adani business dealings, but they both brought new scrutiny to a company seeking to project strength and momentum.
Part of the Adani Group’s seeming resilience, if it holds, could be because of some sound business decisions, such as prepaying loans and briefly holding back on new acquisitions to retain revenue, as well as pure power dynamics. Investors, recognizing the conglomerate’s clout and size, have swallowed the reputational risks of partnerships—especially given that Adani’s economic empire shares warm relations with the Indian government.
Gautam Adani reportedly has close ties to Prime Minister Narendra Modi. The two men are both from the state of Gujarat; Modi famously flew to New Delhi on one of Adani’s planes after he was elected prime minister in 2014. Furthermore, Adani’s core investment portfolio—infrastructure and clean energy—tracks with the prime minister’s policy priorities and gives New Delhi compelling reasons to back him.
Tellingly, in the wake of the Hindenburg allegations, other large Indian business houses with close ties to Modi, including Ambani’s, doubled down on their Adani holdings. It seemed that the state had indirectly expressed solidarity with Adani. This move amounted to the state indirectly expressing solidarity with Adani. To be sure, Adani’s fortunes could decline down the road. But for the moment, Gautam Adani seems like India’s Teflon tycoon—the allegations and criticisms thrown at him are not sticking, and his financial empire remains intact.
The article appeared in the Foreign Policy Magazine.