The Adani Group, a conglomerate that builds and operates ports, power lines and food factories across India, started the year near the top of the world and has grown tenfold in the past two years. Its founder and CEO, Gautam Adani, was the second richest man on the planet last summer, just behind Elon Musk.
Then it crashed even faster than it shot up. Hindenburg Research, a boutique investment firm, released a report on Jan. 24 alleging that the company had inflated its stock through financial gimmicks. That company had bet Adani’s shares would fall, and they went down: By the end of February, the Adani Group’s 10 publicly traded shares had lost two-thirds of their value, a hit of nearly $150 billion. The report convinced almost everyone to head for the exits.
However, the Adani Group persisted. This week it is driving its biggest rally since its demise. The flagship, Adani Enterprises, gained 31 percent in four days. Another unit of the empire, Adani Ports, has fully recovered its losses. Bullish voices say the whole group could rise another 15 to 20 percent this year.
There were many factors that contributed to the survival of the Adani Group over the past four months. It had loyal investors among Indian state institutions, and bargain hunters came in and bought shares at the lowest price. The other reason: Adani had tangible assets, mostly infrastructure projects, that were out there for all to see. These companies, whatever their worth, had a value that many investors found attractive.
But the impetus for this week’s burst of optimism came indirectly from the Indian government.
On Friday, a committee set up by India’s Supreme Court following the January bomb allegations said India’s financial regulators were in fact doing their best to oversee the Adani Group but had failed to get through. in the confusing ownership structures behind the Adani Group. financing. Plus, they probably never will, because they’ve “drawn a void.”
That is a frustrating situation for the agencies involved in protecting India’s capital markets and could give many investors pause for thought. But for investors who sold on the Adani Group, it came as a sweet relief. The court asked the main regulator, known as the Securities and Exchange Board of India, to complete its business before August 14, whether or not it manages to explain who owns the funds that helped Adani’s shares increase tenfold since 2021. Otherwise, the report said, his work could go on endlessly, “a journey with no destination.”
The Adani Group did not immediately respond to requests for comment. It has called claims made by Hindenburg Research in January “baseless allegations based on imaginary fact patterns” and even “a calculated attack on India”.
One of the investors who bought heavily into Adani during the March low, Rajiv Jain of Florida-based GQG Partners, bought even more as it rose this week, according to Bloomberg. Mr. Jain said his total stake in Adani companies was close to $3.5 billion and he cited the value of Adani’s infrastructure companies as a reason for his investment.
Besides infrastructure, one of the Adani Group’s most valuable assets is something less tangible. Gautam Adani and Narendra Modi, the Prime Minister of India, have been working together for decades. They rose through the ranks together in their home state of Gujarat, and Mr Modi flew to New Delhi on a private jet owned by Mr Adani after being elected to head the national government.
Since the shadow of doubt fell over his businesses, Mr. Adani has kept a relatively low profile in India. He continued to work abroad. He opened a new port in Haifa, Israel, where he posed with Mr Modi’s friendly counterpart, Binyamin Netanyahu. And he toured Europe and the United States to reassure investors that he was strong. But Mr Modi himself, once ubiquitous by his side, has refused to mention Mr Adani in public.
The findings of the Supreme Court commission suggest that the Adani Group can now relax as far as Indian authorities are concerned. Without the investigative powers they lack, regulators are unable to pursue the suspicions initiated in January by Hindenburg Research. The Indian political opposition, exploiting the link between Mr Adani and Mr Modi, has called for a special parliamentary panel that may reveal more. But between the court and Mr Modi’s parliamentary majority, they stand little chance.
The position of the Adani Group within India’s political economy appears to have been strengthened, if not fully restored. This is an important development for more than just the winners and losers of the stock market. Mr Modi’s vision for India hinges on building much of the infrastructure.
The country has already accelerated and improved a record number of projects during its nine years in power. Airports, highways, power transmission and more are all dramatically better and more abundant, more so than other indicators like private investment, which economists say are lagging. Much of the money comes from the government. But construction also needs private partners.
New York-based Hindenburg Research had argued that the Adani conglomerate artificially inflated its valuations to raise money it needed to cover its debts to investors abroad. Adani has taken action to pay off its debt, but it still faces scrutiny from foreign regulators.
But in India, Adani’s critics may have to change their plans. Opposition parties complain that they are not allowed to talk about Adani and Modi in the press and even in the Indian parliament. Both local competitors and Adani’s partners must take into account that the central place in the Indian business world remains secure.
