Gautam Adani has been hit by a missile. Hindenburg Research, the storied American short seller and forensic financial analyst, published its damning 106-page and 32,000-word report on the Adani Group on 24 January. The report said the Group is engaged in a “brazen stock manipulation and accounting fraud scheme over the course of decades.” A serious allegation it is. In Hindenburg’s words, Mr Adani is “pulling the largest con in corporate history.”

Hindenburg’s lacerating words were quite damaging. Hurt, the stocks of seven listed Adani Group companies went into a tailspin. By 30 January, the Group’s combined market value had melted down by a whopping USD 65 billion. Though jubilation in the opposition Congress was muted, the gathering storm began spreading panic in the Ahmedabad headquarters of the Group and India’s powerful ruling Bharatiya Janata Party (BJP).

Questioning the Uncanny Timing

The Group’s founder and chairman Mr Adani (60) is betraying no emotion however. Despite Hindenburg, he is in the top 10 of the Forbes’ definitive list of Real-Time Billionaires. He is now the 8th richest man in the world, with a net worth of USD 88.2 billion. Nevertheless, in the coming days, he is sure to move further down the list. Such a demotion will mean difficult days for his Group, the mentoring BJP and India’s crony capitalists. More worries are set to arrive in hordes.

Masking the worries, the USD 124-billion Adani Group went on to slam the report. The Group pointed fingers at political motives lurking behind the report and questioned its uncanny timing. A follow-on public offer of a Group company was mere three days away. The suicidally-leveraged Adani conglomerate, with an aggregate debt of USD 1.9 trillion, has condemned the Hindenburg exercise, calling it an anti-national conspiracy.

Political Links Not a Secret

This condemnation confirms Adani Group’s political links and orientation. Both the BJP and the Congress have helped the Adani bubble become bigger in the past. The Group could bag several projects in the Indian state of Rajasthan, while the Congress was in power there. Allegedly, the Congress Party enabled the Adani Group get wastelands for its Mundra port project in Gujarat and bag the contract for the Dighi port project in Maharashtra.

The Adani Group’s political links have never been a secret. Incumbent governments enjoy mutual back-scratching ties with Mr Adani. While India’s current BJP government sees the Group as a great vehicle for taking the former’s industrial vision forward, the Adanis view the cosy relationship as a passport for fast-tracking their progress. Not surprising, the ambitious Adani Group’s ties with the BJP has been going strong, now for two decades.

Projecting the New Nationalist

With recorded evidence. In 2014, Narendra Modi flew to New Delhi on Adani’s private jet to take over as India’s prime minister. Since 2014, Mr Adani’s wealth has surged from USD 5 billion to a dizzying USD 124 billion. Reason why Mr Adani is derided as ‘Modi’s Rockefeller.’ Riding on the back of such a supportive relationship, the Adani Group has been able to make serial forays into capital-intensive infrastructure sectors.

Ports and airports, roads and rail, power and warehouses turned into child’s play for Mr Adani. This brand of crony capitalism began being touted as the propeller for instant industrial growth in India. In the process, permanent long-term growth, the kind propelled by market-driven structural reforms, is given the go-by. Quite predictable, Mr Adani is projected as India’s new nationalist by the current crop of BJP politicians.

The Report Touches a Raw Nerve

Primarily, the Hindenburg report punctures this projection. The report achieves this by exposing Adani Group’s “vast labyrinth of offshore shell entities” in the tax havens of Mauritius, Cyprus and the UAE, which together control 578 subsidiaries of its seven listed companies. The report asserts many of these shell entities are used for market manipulation. This is quite possible because the floating stock volumes are thin in Adani Group stocks.

The Hindenburg report may have touched a raw nerve here. Reportedly, the Adanis hold higher than the stipulated maximum of 75 per cent in their key four companies. Besides the generous funding of Adani projects with debt, public sector banks and insurance companies are known to be backing the Adanis by holding stocks of their companies. The report hints at how Adani stocks are propped up.

Questions are Mere Mosquito Bites

Such phoney props are Hindenburg report’s central themes. Expected, the Adani Group has dismissed the report as being ‘neither objective, nor independent.’ The Group has threatened legal action against Hindenburg for spreading ‘lies’. Confirming it “fully stands” by the report, Hindenburg has hit back with a countercharge saying Adanis have failed to answer the “88 straightforward questions” placed prominently at the end of the report.

The crony capitalist in Mr Adani may treat the 88 questions as mere mosquito bites. An atmosphere, thick with protection politics and corporate arrogance, may keep the Adani balloon inflated. The tragedy however is this: the balloon has been pricked now by Hindenburg. The forensic analyst had pricked many such balloons in the past, with a 5-year success ratio of 99 per cent.

In Conclusion

Nikola Corporation and Lordstown Motors are two notables among them. Hindenburg had released reports also on Aphria, Wins Finance Holdings, China Metal Resources Utilization, the HF Foods Group and Riot Blockchain. The Adani Group enters this list now. This may well mean shaky banks, struggling insurance firms, diving stock markets, ruined investors and pricklier politics, all real threats to India. Not the minorities, as India’s rulers tell their people.