Gautam Adani faces his biggest challenge yet. Can he survive?

For the better part of 2022, it was all about the Adani Group stocks in the markets. A dizzying run-up in all Adani stocks saw the overall market capitalisation of the group rise over 100 per cent. As investors and analysts saw the group’s meteoric rise on the bourses, Gautam Adani, the 60-year-old boss of the Adani Group, rose to No. 3 in the global wealth ranking, leaving the mighty Mukesh Ambani far behind. It was as if the Adani Group could do no wrong, and the stratospheric growth of the group—which is in the midst of a massive play on the India infrastructure story by way of its airports, ports, roads, power and cement, among other things—was the subject of animated discussion in corporate circles.

Cut to February 2023 and the aftermath of the damaging report by little-known US short-seller Hindenburg Research—which accused the Adani Group of pulling off what it called “the largest con in corporate history” by way of stock manipulation, accounting fraud and routing of funds through overseas shell companies—has shaken the group like never before. While the conglomerate issued a detailed rebuttal to the charges, it wasn’t before over $100 billion of the group’s market capitalisation was wiped off in just a few days. And while the stocks have stabilised somewhat, the erosion in market cap was still at a whopping Rs 10 lakh crore or thereabouts as of February 10. Worse, global banks like Credit Suisse, Citi and Standard Chartered have turned wary of Adani’s bonds and securities. And Indian institutions, including State Bank of India and Life Insurance Corporation, which have exposure to the group, have come in for intense criticism after the Hindenburg allegations.

With a massive $107-billion growth plan lined up for the next 10 years, the Hindenburg report has hit Adani like the proverbial iceberg it never saw coming. The question now is, how will Adani fund his ambitious growth plans, which include a big bet on green hydrogen and a brand new airport project in Navi Mumbai? More important, questions are now swirling around whether the group can service its massive Rs 2.25-lakh crore debt and make scheduled repayments on time.

In our cover story, Ashish Rukhaiyar and Krishna Gopalan speak to bankers, analysts, corporate executives and market participants to put together a detailed picture of what Adani’s options look like. What quite a few agree on is that the cash flows from the slew of assets, and the group’s cash position, offer substantial cushion as far as its debt servicing ability is concerned. With strong assets on the ground generating predictable cash flows, Adani may yet be able to stave off the biggest crisis of his career and live to fight another day. But his ambitious growth plan will have to be made much more realistic as the funding environment turns challenging. And as the crazy valuations become a thing of the past and the group stocks settle at more explicable levels, the regulators will also be taking a close look at the allegations. Clearly, the damage inflicted by Hindenburg—named after an airship disaster of 1937—will take time to be addressed. The dent to the group’s reputation is not going away anytime soon.