In the Adani-Hindenburg saga, there is more at stake than the fortunes of one corporate house

It will be a shame if we don’t see the whole controversy through keen insight and clear judgment. Politics is one thing. But national interests are entirely another.

It will be a mistake to see Hindenburg Report as a matter confined to just Gautam Adani and his sprawling business empire. The future of India’s Growth story is also at stake.

It will not be an exaggeration to say that the fate of Gautam Adani is closely tied to the future of core Indian infrastructure.

Just take a brief survey of Adani Projects

Gautam Adani run some of India’s biggest ports. Together his 13 ports and terminals handle 300 MMT of India’s cargo. And they plan to reach a goal of 500 MMT by 2025, emerging as a serious challenger to some of the world’s largest private port companies, especially Chinese.

Not just that, Adani is critical to India’s aspirations in the maritime trade in the region. Adani is building India’s first deepwater port in Kerala to dock mother vessels. This new port will divert some of the traffic away from ports in Colombo (Sri Lanka), Singapore, Port Klang and Tanjung Pelapas (Malaysia).

As part of India’s neighborhood first policy Adani is also building a port in Sri Lanka. Then Adani recently acquired a port in Israel, countering Chinese hegemony in the Mediterranean.

Adani houses warehouse 30% of its grain

He also operates a fifth of its power transmission lines, accommodates a quarter of its commercial air traffic, and produces perhaps a fifth of its cement.

In the last financial year, the group’s listed companies had total revenues of $25bn, equivalent to 0.7% of Indian GDP, and a net profit of $1.8bn.

Their combined annual capital spending of around $5bn accounts for 7% of India’s 500 biggest non–financial firms. Between 2023 and 2027, his group is forecast to spend more than $50bn on investments. It is building a new airport near Mumbai, splurging $5bn on three seaports, and planning to construct a $5bn steel mill in partnership with Posco, a South Korean conglomerate. Its envisioned projects in renewables and hydrogen are seen as the cornerstone of an effort championed by India’s prime minister, Narendra Modi, to turn the country into a global
clean–energy powerhouse.

But all these projects require substantial capital. Some of it was meant to come from the new share offering, the FPO that Adani had floated.
The Hindenburg report was designed to choke the flow of funds to Adani and his projects.

As a direct outcome of the report, the yields on Adani bonds have gone up, and its share prices have crashed. This would make securing the necessary funds difficult, at least in the short term.

Then there are the possible spillovers to the rest of India Inc.

Because of the Hindenburg saga, in just two days, Friday, January 27th and Monday, January 30th, global funds pulled a net $1.5bn from the Indian stock market. For the first time in two years, Indian markets were lagging behind other emerging markets.

If FIIs flee Indian capital market, it is going to impact the entire economy.

Also what will happen if Adani fails to complete the crucial infrastructure projects in time?

The whole of the Indian economy would suffer. Ports, airports, highways, power plants and transmission lines are arteries of any economy.

All industries and sectors are dependent on this crucial infrastructure

China managed to grow at an unexpected rate in the late 1990s and early 2000s only because it had invested heavily in its infrastructure.
Since India does not have the level of state efficiency that China has, it depends on private players like Adani for timely and efficient execution of infra projects.

Adani’s capabilities in project execution are excellent. Those who are behind the Hindenburg very well know that. Derailing Adani means also derailing the India Growth Story.