Has India’s Adani Group Prevailed?
Nearly a year after bombshell fraud allegations, the conglomerate seems resilient—for now.
Welcome to Foreign Policy’s South Asia Brief.
Welcome to Foreign Policy’s South Asia Brief.
The highlights this week: India’s Adani Group announces a U.S. investment in its Sri Lanka port project, the Bangladesh Election Commission sets a date for a national vote amid opposition protests, and Nepal grapples with soaring public debt.
U.S. to Invest in Adani Group Project
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. 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.
What We’re Following
Bangladesh sets election date. Political tensions have reached a fever pitch in Bangladesh, following massive opposition protests in Dhaka last month. Protesters have staged strikes and blockades that have hampered traffic to and from the capital. Things could escalate in the coming days. The opposition vowed to step up protests if the Election Commission set a date for national polls—and on Wednesday, it announced that they would take place on Jan. 7.
For months, the opposition has insisted that the government step down to make way for a caretaker administration to oversee the elections, which it says cannot be free and fair if administered under the current government. Opposition parties have threatened to boycott elections not overseen by a caretaker government, but Dhaka has so far refused to give in to their demands.
Bangladesh previously had a caretaker government arrangement, but the Supreme Court struck it down in 2011. With Bangladesh’s politics so polarized, neither side is likely to compromise, suggesting that the current confrontation will continue to play out—including on the streets—until January, especially if the opposition carries out its boycott threat.
Ominous signs in Pakistan. Less than two weeks after Pakistan announced that its national election would take place on Feb. 8, new developments are raising fears that the polls will not be free and fair. On Nov. 4, Fawad Chaudhry, a political leader once allied with jailed former Pakistani Prime Minister Imran Khan, was reportedly arrested at home with no public explanation. Last Saturday, a top leader in Khan’s Pakistan Tehreek-e-Insaf (PTI) party, Asad Umar, announced that he was quitting politics.
Chaudhry’s arrest is striking because he quit PTI relatively early, joining a new party of former PTI leaders, which many observers of Pakistani politics believed to be backed by the country’s military. That he was arrested suggests the military doesn’t think Chaudhry has distanced himself enough from Khan. Umar’s resignation—a step other party leaders have taken under pressure from the military—leaves few remaining top leaders in the party.
Taken together, these developments show how far Pakistan’s powerful military has gone to undermine PTI and hamper its capacity to return to power. PTI is one of Pakistan’s largest political parties and possibly its most popular. Its current plight attests to the lack of a level electoral playing field in Pakistan.
Nepal’s debt soars. Although Pakistan and Sri Lanka have experienced South Asia’s worst debt crises in the last few years, Nepal is also grappling with serious challenges. According to new data from Kathmandu’s Public Debt Management Office (PDMO), public debt rose by nearly $310 million during the first quarter of Nepal’s current fiscal year (which began on July 16). Total debt stands at nearly $18 billion, accounting for around 44 percent of Nepal’s GDP.
The PDMO blames the government’s reliance on borrowing for its debt crisis, although Kathmandu’s heavy spending during the COVID-19 pandemic is likely a factor as well, as are the external economic shocks triggered by Russia’s war in Ukraine. Nepal’s economy on the whole has also suffered this year, with the country entering its first recession in six decades in April, attributed in part to worsening inflation and political instability.
The challenge for Nepal’s government, which made headlines this week for banning TikTok over purported threats to “social harmony,” will be navigating a fractious political environment to develop a sustainable economic recovery plan.
Under the Radar
Any discussion on the global arms trade must include India, the world’s largest arms importer. However, as Indian military power and indigenous arms production capacities continue to grow, the country is slowly evolving into a weapons supplier as well. In recent years, India has provided weapons to Armenia, Indonesia, and Myanmar. A pending delivery of arms to the Philippines is especially significant, particularly for the United States.
Last year, New Delhi and Manila inked a $368 million deal for three batteries of Indian anti-ship supersonic missiles, produced by BrahMos Aerospace, to be sent to the Philippines. Last week, India’s ambassador in Manila, Shambhu Kumaran, said the delivery was “on track.” Earlier reports indicated that the missiles could arrive in December, although Kumaran wouldn’t confirm that.
Either way, the timing of Kumaran’s assurances about the deal is notable. In recent days, Philippine and Chinese ships have faced off in the South China Sea in a disputed reef known as the Second Thomas Shoal. The Philippines seems to see the Indian-made missiles as a critical tool of deterrence; one official has described them as a “vital asset” to “protect the integrity of its territory.”
By strengthening the capacity of the Philippines, a U.S. treaty ally, to counter Chinese military power, the missiles will help advance U.S. interests in the Indo-Pacific. They will also help boost U.S. expectations that India will become a net security provider in the region in due course.
FP’s Most Read This Week
- The World Won’t Be the Same After the Israel-Hamas War by Stephen M. Walt
- The West’s Incoherent Critique of Israel’s Gaza Strategy by Raphael S. Cohen
- This War Won’t Solve the Israel-Palestine Conflict by Steven A. Cook
In Dawn, child advocate and nonprofit founder Madeeha Ansari discusses how Pakistan’s decision to expel undocumented foreigners will impact children. “[S]udden and involuntary migration can have a deeply traumatic impact for which there are unlikely to be psychosocial support mechanisms, or the provision of safe and child-friendly spaces that can provide stability,” she writes.
In Kuensel, lawyer Sonam Tshering reflects on Bhutan’s experiences with its current constitution, which marks its 15th anniversary this month. “[W]e must resist the allure of short-term, politically expedient promises and instead support political parties that demonstrate a genuine commitment to upholding the Constitution and fostering the nation’s long-term prosperity,” he writes.
Writer Ranga Jayasuriya argues in the Daily Mirror that Sri Lanka needs more private university education. “[I]f Sri Lanka is to take off economically, as much as integrating itself with global supply chains, it needs to update its human capital,” he writes. “For that, it should promote and build private universities.”
Michael Kugelman is the writer of Foreign Policy’s weekly South Asia Brief. He is the director of the South Asia Institute at the Wilson Center in Washington. Twitter: @michaelkugelman
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