Things were going so well for businessman Gautam Adani. In 2022, he briefly became the world’s second-wealthiest man. At the start of this year, India Today anointed him its newsmaker of the year with a fawning profile, calling him the “growth king.” In January, his conglomerate Adani Group was expected to make a follow-on public offering that would raise as much as $2.4 billion. Adani—the man and the group—seemed invincible.
Adani remains the newsmaker of the year but for different reasons. One week before the follow-on offering, New York-based investment firm Hindenburg Research published a report alleging that Adani Group had inflated its stock price and market valuation by “round tripping”—getting obscure companies reportedly linked to Adani and registered in a tax haven to invest in its stocks. The report said Adani was pulling the “largest con in corporate history.”
Adani denied the allegations and hired a top New York law firm to represent the conglomerate against potential claims in the United States. But even so, in public markets, the conglomerate was falling from grace. In the wake of the report, credit rating agency Moody’s Investors Service gave four Adani Group stocks a negative outlook. Morgan Stanley Capital International reduced the weight given to Adani Group stocks, increasing downward pressure on share prices. S&P Dow Jones Indices removed the stocks from its sustainability index, Norway’s sovereign wealth fund sold its holdings in the conglomerate, and Credit Suisse and Citigroup said they would no longer accept Adani Group securities as collateral.
Things were going so well for businessman Gautam Adani. In 2022, he briefly became the world’s second-wealthiest man. At the start of this year, India Today anointed him its newsmaker of the year with a fawning profile, calling him the “growth king.” In January, his conglomerate Adani Group was expected to make a follow-on public offering that would raise as much as $2.4 billion. Adani—the man and the group—seemed invincible.
Adani remains the newsmaker of the year but for different reasons. One week before the follow-on offering, New York-based investment firm Hindenburg Research published a report alleging that Adani Group had inflated its stock price and market valuation by “round tripping”—getting obscure companies reportedly linked to Adani and registered in a tax haven to invest in its stocks. The report said Adani was pulling the “largest con in corporate history.”
Adani denied the allegations and hired a top New York law firm to represent the conglomerate against potential claims in the United States. But even so, in public markets, the conglomerate was falling from grace. In the wake of the report, credit rating agency Moody’s Investors Service gave four Adani Group stocks a negative outlook. Morgan Stanley Capital International reduced the weight given to Adani Group stocks, increasing downward pressure on share prices. S&P Dow Jones Indices removed the stocks from its sustainability index, Norway’s sovereign wealth fund sold its holdings in the conglomerate, and Credit Suisse and Citigroup said they would no longer accept Adani Group securities as collateral.
Although market reaction has dominated headlines, the political response has been just as absorbing. A senior Adani executive described the report as an attack on India itself. Meanwhile, the opposition Indian National Congress party has demanded answers from Indian Prime Minister Narendra Modi; Congress leader Rahul Gandhi made remarks in Parliament about Modi’s reported ties to Adani that were later expunged from the official record.
Adani’s ties with Modi are strong and deep. India has a thriving private sector, but the rise of Adani has been particularly spectacular, coinciding with Modi’s ascent to power. Unlike Japanese or South Korean conglomerates, which are oligopolies that often compete with one another, Adani’s rise is similar to the growth of tycoons in Southeast Asia, who benefit from monopolies they carve for themselves with the support of strong political leaders, such as former Philippine President Ferdinand Marcos, former Indonesian President Suharto, or former Malaysian Prime Minister Mahathir Mohamad, who all served between the late 1970s and mid-1990s.
Adani Group has grown remarkably during Modi’s time in power. Adani himself has been a cheerleader for the politician since 2002, when deadly riots undermined business confidence in the state of Gujarat—where Modi served as chief minister between 2001 and 2014. The state is known for its enterprise, but in the wake of communal violence, investors began to turn away. Adani came to Modi’s rescue, bringing Gujarati business leaders together to invest in the state’s resilience. Modi doesn’t forget those who criticize him, but he also remembers those who stand by him.
While Modi was chief minister, Adani invested in several plum projects in the state, including India’s largest private port in Mundra, Gujarat. By early 2019, Adani controlled one-quarter of India’s port capacity and had won the rights to manage six government-owned airports; he later added a 74 percent share in Chhatrapati Shivaji Maharaj International Airport, India’s second-busiest. In 2021, Adani Group announced an ambitious green energy project. But while Modi’s supporters may credit him with fashioning the so-called Gujarat model, where private enterprise plays a dominant role in economic development, the state has a centuries-long private sector tradition that has driven its growth.
Business acumen is rooted in Gujarat’s culture. The state has India’s largest coastline, and Gujarati traders have long sailed from its shores to do business across the Indian Ocean and beyond. Typical Gujarati tycoons don’t seek to upset the government, but they also don’t want the state intruding in business affairs. The role of a wise merchant who guides the state was exemplified by the Mahajans, who served as creditors, traders, and bankers. When eight prominent businessmen, including five Gujaratis, came together to write the Bombay Plan for India’s economy in 1944, they treated it as an exercise in protecting their interests by shielding business from foreign competition and letting the state build infrastructure.
Today’s Indian capitalism differs from that of the past. During the decades that followed independence, when India liberalized its economy and companies needed government permission to raise capital or expand operations, Indian businesses competed while figuring out how to master a byzantine bureaucracy. Then, there were strict limits on private businesses: about whether they could lay off employees or which sectors they could invest in, for example. But in 1991, then-Indian Prime Minister P.V. Narasimha Rao and then-Finance Minister Manmohan Singh launched economic reforms that allowed Indian businesses to begin to flex their muscles.
If the old Gujarat model made businesses succeed by keeping them away from the government’s tentacles, the version embraced by Modi and Adani now blurs the lines between the state and the private sector. According to one account, Adani Group paid between 1 and 32 rupees per square meter to develop its Mundra Port and special economic zone, considerably lower than what other companies paid for similar transactions. Four years after Modi became prime minister in 2014, India changed the rules to allow a company with no prior experience to bid for airports, and Adani ended up with six. When India announced plans to introduce market-oriented agriculture reforms—later repealed—Adani invested in grain silos.
This model might sound like East Asian crony capitalism, with a politician providing favors to supportive business tycoons to boost their companies—like Japan’s sogo shosha or South Korea’s chaebol. But there is a key difference. The Japanese sogo shosha were interlocked trading entities that intermediated with one another to enjoy economies of scale; the South Korean chaebol were postwar nation-builders, effectively venture capital firms in a country starved of capital. In both cases, conglomerates benefited from state protection and patronage, but they did compete with one another in various sectors. Adani Group’s rise creates a near-monopoly status for the group across several industries.
Adani’s trajectory instead seems to follow the kind of capitalism that prevailed under Marcos, Suharto, and Mahathir. In these cases, the ruling strongmen had extremely close ties with select businesses. Marcos had Antonio Floirendo, the banana king, and Eduardo “Danding” Cojuangco, the coconut king. Suharto had Liem Sioe Liong, Mohamad “Bob” Hasan, and other tycoons who formed business relationships with his children, making the partnerships mutually beneficial. Mahathir had Tajudin Ramli. These businessmen prospered while the going was good and supported the long political reign of their patrons. As a result of their closeness to the ruling governments of the time, these Southeast Asian tycoons often received contracts that created monopolies through patronage.
There are no confirmed direct business ties between Modi and Adani, and (of course) Adani Group also has operations in opposition-led states. But the two men are close. In 2014, when Modi left Gujarat for New Delhi to be sworn in as prime minister, he flew on Adani’s private plane. Adani has traveled with the prime minister on a few overseas trips. When Adani’s son got married in Goa in 2013, Modi reportedly attended the ceremony for two full days. Meanwhile, the political opposition alleges that the Indian government has applied pressure on its neighbors, including Sri Lanka and Bangladesh, to give favorable energy deals to Adani Group. (The conglomerate denied renegotiating its power purchase agreement with Bangladesh.)
Adani’s central defense against the Hindenburg report’s allegations is that he has done nothing wrong under Indian law—although for nearly a decade, Indian government auditors have passed adverse comments on Adani Group. Modi himself has remained largely silent about the allegations against Adani Group, and his ministers have only said appropriate regulators are examining the issue. With a few exceptions, Indian media has been reluctant to scrutinize Adani’s conduct, at least in part because his companies have sued critics. Nevertheless, since the Hindenburg report was published, Indian market regulators have begun looking into overseas companies allegedly linked with Adani.
As he seeks to remake India, Modi is also seeking to remake Indian capitalism. One clear result of his years in power is the shifting position of the business owner in society: Instead of a respectable trustee who can help guide the state’s administration, the businessperson has become an often fearsome ally happy to do politicians’ bidding and secure contracts by cultivating the right contacts. This shift will lead to a plutocratic society, far removed from the public-spirited capitalism its founding father Mahatma Gandhi championed. India now seems further from those ideals than ever before.
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