The crisis in India’s Adani group has revived allegations that the conglomerate has had the backing of prime minister Narendra Modi’s government for years, the latter’s noticeable silence on the matter notwithstanding.
A key area of focus among India’s opposition parties now is Adani’s winning bid a few years ago to manage six major airports, making the company the country’s largest airport operator. Interestingly, it had no prior experience in airport management at that time, sparking allegations of undue favors and crony capitalism.
“From running a private airstrip at Mundra, the Adani group’s transformation into the country’s largest private developer...happened over less than 24 months,” The Indian Express reported today (Feb. 8).
Several news media outlets had earlier reported that the Indian government had ignored concerns of its own finance ministry and its think tank, National Institution for Transforming India (NITI) Aayog, on the matter.
The Adani group has been rocked by allegations of fraud and stock manipulation made by US-based Hindenburg Research last month. A stock market blood bath followed, wiping out the group’s market capitalization by more than $100 billion.
In February 2019, the Gautam Adani-led group won the bid to operate six airports—Ahmedabad, Lucknow, Jaipur, Mangaluru, Guwahati, and Thiruvananthapuram.
However, India’s department of economic affairs (DEA) under its finance ministry and NITI Aayog had objected to giving all six airports to one bidder, the Indian Express reported in 2021, citing government documents.
DEA did not favor letting one bidder win more than two airports as that could lead to a huge financial risk. NITI Aayog said, “a bidder lacking sufficient technical capacity can well jeopardize the project and compromise the quality of services that the government is committed to providing.”
Earlier, in March 2019, the online portal Newsclick, also based on documents, made similar allegations about the move to privatize the airports in the first place. “...conditions were set up that apparently favored the Adani group...the proposal to privatize the six airports was conceived and pushed through in a tearing hurry, in contravention of the law and existing procedures,” Newsclick reported.
The government has consistently denied favoring Adani. Recently, Gautam Adani himself denied receiving personal favors from the prime minister. He was responding to doubts over his meteoric rise under the Modi regime.
Meanwhile, after losing over $100 billion in market capitalization following the Hindenburg report’s publication on Jan. 24, the freefall in Adani stocks has ended, at least for now. The quarterly earnings reports by the group companies may have helped. Besides, the group is also mulling prepaying $1.1 billion in loans to soothe panicked investors.
Media reports published shortly before the crisis erupted had said Adani may bid for more airports that the government is set to auction. However, with its ability to spend on major projects now massively curbed, the plan may hit a speed bump.