Bangkok Rahul Gandhi, India’s most prominent opposition figure, covered a total of 3,570 kilometers on his protest march across the subcontinent. However, the 52-year-old only found the topic with which he is now trying to drive the government of Prime Minister Narendra Modi in front of him when he returned to Delhi: the billion-dollar affair surrounding the formerly richest Indian Gautam Adani, who, according to Modi’s critics, lived for years from is said to have benefited from his proximity to the government.
Adanis conglomerate, which controls important parts of India’s infrastructure, has been at the center of allegations of fraud by American investor Hindenburg Research since the end of January. As a result of the allegations, which Adani denies, the stock market value of the group of companies fell by more than 100 billion dollars within a few days. Index provider MSCI’s announcement that it would reassess Adani papers in light of the scandal brought another price slide on Thursday.
The opposition around Gandhi, one of the leading MPs of the Congress Party, is now hoping that the stock market quake will also shake up India’s domestic politics: in the year before the next parliamentary elections, a third Modi term in office seemed almost certain until recently.
Now the prime minister’s opponents believe they have found a target for attack. In Parliament this week, Gandhi held photos in the direction of cameras said to show Modi’s close ties to Adani. Among other things, they showed the head of government and the billionaire on a joint flight.
On his long march he was repeatedly asked about Adani, Gandhi said. “Everywhere I was asked how it is possible that Adani is successful in every business and how it is possible that he never fails?” said the politician, referring to the Adani empire, which, among other things, ranges from coal mines to airports, Cement manufacturers and armaments suppliers are enough. The most important question is: “What is his relationship with the Prime Minister of the country?”
Modi and Adani: Two old friends
Adani and Modi are both from the state of Gujarat, where Modi led the local government for 13 years and Adani built India’s largest private port. When Modi won the 2014 general election with his Hindu nationalist party BJP, he flew to New Delhi in a private jet with the inscription “Adani” on it. Ever since then, Modi and Adani have been considered powerful allies by the public.
Both the government and Adani have always denied that there was any kind of preferential treatment. Gandhi spoke of a “real magic” that led to Adani moving from 609th place in the global list of the rich to a place in the top three from 2014 until earlier this year. Among other things, he complains that the government has changed regulations that would have allowed Adani to become one of the largest airport operators in the country without any relevant experience.
The Adani affair threatens the re-election of the Indian prime minister.
(Photo: Reuters)
Modi’s ruling party has vehemently denied the allegations. Justice Minister Kiren Rijiju accused Gandhi of making “wild claims” without providing evidence. Finance Minister Nirmala Sitharaman spoke of “insinuations” by the opposition and confirmed that all tenders had been carried out properly.
Modi himself spoke in parliament on Wednesday. He did not address the Adani affair directly. However, he said the millions of peasants, poor and women who have benefited from the government’s welfare benefits do not believe the opposition’s “false claims”.
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In fact, it will probably be difficult for the opposition to win votes with the complex Adani affair. The allegations against the group, which relate to alleged price manipulation and balance sheet falsification, are far removed from the reality of life for many Indians. Protest actions, for example in front of the offices of the state insurance company LIC, which has invested billions in the Adani Group, only met with muted interest.
MSCI targets Adani stocks
This is only likely to change if the group’s crisis worsens. The global index provider MSCI showed on Thursday that the affair for Adani is far from over: The company announced a revaluation of the Adani securities in its indices with regard to the free float. It has been determined that there are uncertainties regarding certain shareholders and that these “according to our methodology should no longer be classified as free float,” MSCI said.
The company is apparently referring to Hindenburg Research’s suspicion that offshore companies have been used to disguise the true extent of Adani’s family holdings. This was denied by Adani.
Hindenburg Research founder Nate Anderson wrote in response to the MSCI announcement on twitter: “We consider this as confirmation of our findings on offshore stock parking by Adani.”
The MSCI decision can now lead to the weighting of Adani securities in MSCI indices being reduced or the securities falling out completely. MSCI plans to announce the exact effects late Thursday evening. Changes would also affect index funds, which may have to sell Adani shares as a consequence.
After several days in which the Adani papers were able to make up some of the losses, the MSCI announcement caused the price to fall again. The group’s main company, Adani Enterprises, lost 11 percent in value.
The French energy group Total Energies, which put a plan worth billions to produce green hydrogen with the Adani Group on hold, also caused bad mood among Adani investors. The cooperation announced by the two companies last year will not be signed for the time being, said Total Energies boss Patrick Pouyanné. He first wanted to wait for an examination of the processes at the Indian partner.
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