Crony Capitalism: Hindenburg Report Demands Serious Probe


The report alleges “brazen stock manipulation” and “accounting fraud” by the Adani Group via “a vast labyrinth of offshore shell entities”. 

Jairam Ramesh

A political party should not react to a research report on an individual company or business group prepared by a hedge fund. But the forensic analysis by Hindenburg Research of the Adani Group demands a response from the Congress party. This is because the Adani Group is no ordinary conglomerate: it is closely identified with Prime Minister Narendra Modi since the time he was the chief minister of Gujarat.

Furthermore, the high exposure of financial institutions such as the Life Insurance Company of India (LIC) and the State Bank of India (SBI) to the Adani Group has implications for financial stability and for the crores of Indians whose savings are stewarded by these pillars of the financial system. It may be recalled that earlier reports had described the Adani Group as “deeply over-leveraged”. The allegations require serious investigation by those who are responsible for the stability and security of the Indian financial system, viz. the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI).

The Hindenburg report alleges “brazen stock manipulation” and “accounting fraud” by the Adani Group via “a vast labyrinth of offshore shell entities”. The evolution and modernisation of India’s financial markets since the 1991 reforms have aimed to improve transparency and level the playing field for domestic and foreign investors. It has specifically sought to increase the transparency of financial flows into the country — to prevent round-tripping and money laundering by actors that could include criminals, terrorists and hostile countries — and to reduce dependence on offshore tax havens. For all its posturing about black money, has the Modi government chosen to turn a blind eye towards illicit activities by its favourite business group? Is there a quid pro quo? Will SEBI investigate these allegations to the fullest and not just in name?

Allegations of financial malfeasance would be bad enough, but what is worse is that the Modi government may have exposed India’s financial system to systemic risks through liberal investments in the Adani Group made by strategic state entities like LIC, SBI and other public sector banks. These institutions have liberally financed the Adani Group even as their private sector counterparts have chosen to avoid investing because of concerns over corporate governance and indebtedness. As much as 8% of LIC’s equity assets under management, amounting to a gigantic sum of ₹74,000 crore, are in Adani companies and comprise its second-largest holding.

State-owned banks have lent twice as much to the Adani Group as private banks, with 40% of their lending being done by SBI. This irresponsibility has exposed the crores of Indians who have poured their savings into LIC and SBI to grave financial risk. If, as alleged, the Adani Group has artificially inflated the value of its stock through manipulation, and then raised funds by pledging those shares, banks such as SBI could face heavy losses in the event of a fall in those share prices. Indians are increasingly aware of how the rise of Modi’s cronies has exacerbated the problem of inequality, but need to understand how this has been financed by their own hard-earned savings. Will the RBI ensure that risks to financial stability are investigated and contained? Are these not clear-cut cases of “phone banking”?

None of this will be easy. In recent years, the Adani Group has built monopolies in ports and airports and become an overwhelmingly dominant player in power, roads, railways, energy and media. In perhaps the most egregious case of crony capitalism, the previous operator of Mumbai’s Chhatrapati Shivaji Maharaj International Airport, India’s second busiest airport, was raided by the Enforcement Directorate (ED) and the Central Board of Investigation (CBI) after it rejected an offer by the Adani Group. The operator agreed to sell the airport to Adani a month later and it is a mystery what happened to the ED and CBI cases thereafter.

We fully understand the close relationship between the Adani Group and the current government. But it is incumbent on the Congress as a responsible opposition party to urge SEBI and RBI to play their roles as stewards of the financial system and to investigate these allegations in the wider public interest.

The Modi Sarkar can try and impose censorship. But in an era of globalisation of Indian businesses and financial markets can Hindenburg-type reports that focus on corporate misgovernance be simply brushed aside and dismissed as being “malicious”?


The writer is a Member of Parliament and AICC General Secretary (Communication). Views expressed here are author’s personal.


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