Modi's Rockefeller' - Gautam Adani and The Concentration of Power in India - Financial Times

11/15/2020 ‘Modi’s Rockefeller’: Gautam Adani and the concentration of power in India | Financial Times
The Big Read Indian business & finance
‘Modi’s Rockefeller’: Gautam Adani and the concentration of power in

India
Critics say his rise is symbolic of a system where too much power is in the hands of too few
Stephanie Findlay in New Delhi and Hudson Lockett in Hong Kong NOVEMBER 13
2020
When the Indian government approved the privatisation of six airports in 2018, it
relaxed the rules to widen the pool of competition, allowing companies without any
experience in the sector to bid. There was one clear winner from the rule change:
Gautam Adani, the billionaire industrialist with no history of running airports,
scooped up all six.
His clean sweep was met with outrage. The Kerala state finance minister said Mr
Adani winning the 50-year lease to operate the Trivandrum International Airport was
an “act of brazen cronyism” that showed how the central government favoured
politically connected tycoons. India’s aviation minister replied that the open bidding
process was carried out in a “transparent manner”.
Overnight Mr Adani became one of the country’s biggest private airport operators. He
is also its largest private ports operator and thermal coal power producer. He
commands a growing share of India’s power transmission and gas distribution
markets, and this year announced that his renewables arm Adani Green Energy would
invest $6bn to build solar plants with a capacity of 8GW, one of the largest renewables
projects in the world.
Along with Reliance Industries chairman Mukesh Ambani, Mr Adani is today one of
the most visible tycoons in the country, whose prominence has accelerated in the
years since Narendra Modi was elected prime minister in 2014. Like both Mr Modi
and Mr Ambani, Mr Adani comes from the western state of Gujarat, where he was a
key supporter of Mr Modi and his ruling Bharatiya Janata party as it rose to dominate
national politics.
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When Mr Modi took office, he flew from Gujarat to the capital New Delhi in Mr
Adani’s private jet — an open display of friendship that symbolised their concurrent
rise to power. Since Mr Modi came into office, Mr Adani’s net worth has increased by
about 230 per cent to more than $26bn as he won government tenders and built
infrastructure projects across the country. “Nation building” is Mr Adani’s motto and
he likes to talk about helping India achieve energy security.
But as New Delhi accelerates its privatisation drive to offset the severe economic
shock of the coronavirus pandemic, Mr Adani’s mushrooming empire has become a
focus of criticism for those who believe that capital is being concentrated in the hands
of a few favoured corporate titans at the expense of India’s middle class.
Some argue the concentration of economic power in family-run conglomerates is a

way to fast-track India’s economic development, like the chaebol did
for postwar South Korea. But critics say the rapid consolidation of state assets is
creating monopolies and stifling competition.
“Is India going to move towards the east Asian model or the Russian model? So far the
tendency looks towards the latter [more] than the former,” says Rohit Chandra,
assistant professor of public policy at the Indian Institute of Technology Delhi. “It’s
not clear whether India’s concentration of capital will lead to the long-term benefit of
Indian consumers.”
Farmers and their children shout slogans before burning effigies of Narendra Modi (C), Reliance Industries chairman Mukesh Ambani
(R) and Gautam Adani following the recent passing of agriculture bills in parliament, in Amritsar © AFP via Getty Images
Workers arrive at Mundra Port Coal Terminal in the western Indian state of Gujarat © Reuters
Whether India’s industrialisation leaves it more closely resembling the US at the turn
of the 20th century when the likes of oil magnate John D Rockefeller wielded vast
influence, or Russia in the 1990s, Mr Adani’s voracious appetite for dealmaking and
political instincts have ensured he will play a central role.
“Gautam Adani is very powerful, very politically well connected and very astute at
using that power,” says Tim Buckley, an energy analyst based in Australia who tracks
India. “He is Modi’s Rockefeller.”
The Adani Group declined to comment for this article.
Beyond Gujarat
The meteoric rise of Mr Adani started when he offered support to Mr Modi in 2003.
At the time, the politician — then chief minister of Gujarat — was being heavily
criticised for failing to control violent riots that had rocked the state a year earlier.
More than 1,000 people died, most of them Muslims, and Mr Modi was being
shunned by India’s business elite and the world — he was barred from entering the US
for almost a decade until he became prime minister.
But when some of the country’s most powerful tycoons grilled him onstage over
the deaths at an event hosted by the Confederation of Indian Industry (CII), Mr Adani
broke ranks with the old business elite, potentially risking his future for the under-
fire politician.
The businessman then helped set up a new industry body to sideline the CII and was
behind Vibrant Gujarat, a glitzy biennial summit that would introduce Mr Modi to the
world stage and cement his reputation as a pro-business leader. The gamble paid off
for Mr Adani, a plain speaker who sets himself apart from the corporate establishment
in Mumbai by dividing his time between the company’s headquarters in Ahmedabad,
Gujarat’s largest city, and New Delhi, the Indian capital.
“These are new Indians running the government, they have a completely different
view of the world and their view is very local,” says an executive present at the
acrimonious 2003 event. “Old relationships have flowered and flowered because these
are the people they [the government] feel comfortable with.
“Adani was big time in Gujarat and now he’s spreading his wings,” he adds.
Mr Adani, 58, is a rarity among the ranks of Indian dynasts: he is a self-made man,
born into a family of eight that practised Jainism, an Indian religion that emphasises
ascetic beliefs. After dropping out of college to try a career in Mumbai’s diamond
industry he moved back home to import plastics for manufacturing, a business that
would lay the foundation for his conglomerate.
Passengers wait to board their flights after Adani Group took over operations of Sardar Vallabhbhai Patel International Airport in
Ahmedabad last week © Reuters
Members of Airport Authority Employees Union protest over the approval to lease three airports under the public-private
partnership model, outside LGBI Airport in Guwahati © Barcroft Media via Getty Images
In the late 1990s he won the rights to operate Mundra port, located on the mangrove-
lined Gujarat coast on the Arabian Sea. He expanded terminals and gained scale,
using the cash from operations and a gift for navigating Indian bureaucracy to acquire
and develop other ports.
Since then, he has taken on large amounts of debt to build a pit-to-plug vertically
integrated power supply chain and a portfolio of businesses spanning defence to data
centres and even apple farms in the mountainous state of Himachal Pradesh.
The Adani Group’s total outstanding debt came to more than $30bn as of November
11, according to data from Dealogic, including $7.8bn worth of bonds and $22.3bn in
loans. High debt is nothing new among Indian conglomerates but the Adani Group’s
rapid expansion has raised concern.
Credit Suisse warned in a 2015 “House of Debt” report that the Adani Group was one
of 10 conglomerates under “severe stress” that accounted for 12 per cent of banking
sector loans. Yet the Adani Group has been able to keep raising funds, in part by
borrowing from overseas lenders and pivoting to green energy.
“Groups that are perceived as politically connected can still tap the banks for loans,”
says Hemindra Hazari, a Mumbai-based banking analyst. “If you are any other highly
stressed group, then it is difficult for you.”
Containers are unloaded at Adani Ports and Special Economic Zone at Mundra, some 400 kms from Ahmedabad © AFP via Getty
Images
Gautam Adani at the wedding reception of senior advocate and Rajya Sabha MP Vivek Tankha’s son Varun in February in New Delhi
© Hindustan Times via Getty Images
Going green
The latest front Mr Adani has opened in his quest to dominate Indian infrastructure is
renewables, which serve the dual purpose of supporting Mr Modi’s “self reliant India
programme” to help overcome the economic shock of the pandemic and of helping to
rehabilitate his image with environmentalists.
His Carmichael coal mine project in Australia was the target of a massive campaign
that depicted him as a climate change villain. Teenage environmentalist Greta
Thunberg received more than 70,000 likes on her tweet in January calling for people
to #StopAdani. The mine project — which was initially valued at $16bn — is going
ahead, though some investors are dropping out as boards get stricter on sustainability
targets.
Twice weekly newsletter
While it has been a good year for India’s solar

sector, Adani Green Energy stands head and
shoulders above its peers. The value of Azure
Power, a rival listed in New York and valued
at about $1.4bn, has climbed almost 130 per
Energy is the world’s cent this year. Adani Green, which has
indispensable business and pledged to build 25GW in renewable power
Energy Source is its newsletter. by 2025 has soared 440 per cent, giving it a
Every Tuesday and Thursday, market capitalisation of almost $20bn.
direct to your inbox, Energy
Source brings you essential Mr Adani’s personal stake in the solar unit is
news, forward-thinking analysis valued at $13.9bn and, once liabilities are
and insider intelligence. Sign up accounted for, amounts to about half of his
here.
net worth, according to analysis from
Bloomberg.
International investors are paying attention.

In February, French energy group Total SA announced it was investing $510m in
Adani Green. But a banker who has followed the Adani Group for more than a decade
at a US investment bank questions Adani Green’s market valuation in light of its low
liquidity, with barely $2m in shares traded a day.
Adani Green, which has yet to record a profit and tapped international debt markets
for $863m in funds last year, according to Dealogic, is an example of the Adani Group
loading up on leverage to finance expansion. New ventures in the past have been
underpinned by Adani Ports. Analysts note that the Adani Group has taken measures
in the past year to reduce reliance on what the banker calls “funding arbitrage”, a
common tactic for Indian tycoons in which bonds issued by profitable arms help fund
new ventures.
Mr Adani continues to enjoy ample access to capital, both at home and overseas, and
can tell investors that he has never defaulted on a loan despite highly leveraged
balance sheets. Adani Group companies tapped international debt markets with bond
sales of more than $2bn and Adani Gas sold a 37.4 per cent stake to Total for a
reported $600m, which gave him ample cash flow to weather the shock of the
pandemic when it hit.
And international groups are queueing up to partner with the mogul. Earlier this
month, Adani announced a strategic collaboration in hydrogen and biogas with Italian
gas and infrastructure group Snam.
Mr Chandra says the foreign companies are relying on connected business leaders to
navigate India’s volatile regulatory and tax landscape. “This capital is going to
favoured companies, not because they deserve it, but because they are the ones that
can mediate [the regulatory environment],” he says.
Growing risks
The ascent of the Adani Group has been plagued with controversy and allegations
ranging from fraud to environmental abuses. In February, it pleaded guilty to
misleading the environmental authorities in Australia over land clearing at the
Carmichael mine site and was fined A$20,000.
Along with a group of other companies, it is also being probed by India’s Directorate
of Revenue Intelligence in connection with allegations of over-invoicing billions of
dollars worth of coal imports from Indonesia. The Adani Group has in the past said it
“strongly denies the allegations of overvaluation”.
The company has also been dogged by claims that it has been on the receiving end of
preferential treatment in regulatory decisions that have made otherwise risky projects
much more attractive.
One claim relates to the Godda coal-fired power plant under construction in
Jharkhand state, which plans to import coal from Australia and export power to
neighbouring Bangladesh, a country with an excess of coal plants in the pipeline.
Narendra Modi with Gautam Adani and other delegates at Vibrant Gujarat Global Summit in Gandhinagar last year © Hindustan
Times via Getty Images
Protests in Brisbane, Australia, last year. There are calls for the Queensland State Government to withdraw its approval of the Adani
coal mine © Getty Images
Analysts estimate that Adani Power will charge customers more for Godda’s electricity
than other plants in Bangladesh and India. The office of the state accountant general
warned in a leaked audit report that the higher tariffs represented “preferential
treatment” that would result in “undue benefits”.
In the final months of Mr Modi’s first term in 2019, New Delhi gave the green light for
Mr Adani’s plant to be declared a special economic zone, a designation that comes
with significant tax benefits. Godda became Adani’s second SEZ after Mundra port.
Opponents have filed a petition in the High Court of Jharkhand against the state
government alleging that Adani Power acquired the land on which Godda is built for
private use and that the transfer violates ownership rules protecting tribal groups
living in the area.
Adani Power using the land to build Godda is “completely illegal, void and arbitrary”,
argues Ranchi-based human rights lawyer Sonal Tiwary. “The whole profit goes to
Adani, the people of Godda don’t receive anything.” The state government has not
filed a counter affidavit yet.
In response to land acquisition allegations, Adani Power said in a statement earlier

this year that the land was acquired “within the rules”. It added that it “had not made
any requests to the Government of Jharkhand to alter energy policy rules or
provisions”.
Political risk
The Adani Group’s expansion has become even more marked as the pandemic
ravaged India’s economy. The country’s gross domestic product is expected to
contract by around 10 per cent in 2020, with the weight of Covid-19 cases seemingly
ruling out a swift return to normality.
Though India’s sovereign debt rating is at risk of a downgrade to junk status — a

result of the pandemic which has killed more than 127,000 people and infected over
8.6m in the country — few think Mr Adani’s access to capital will face serious
constraints.
Abhishek Tyagi, a senior analyst at Moody’s, says for large corporates like the Adani
Group, “there are other avenues for raising capital”, including partnerships with the
likes of Total as well as domestic banks and financial institutions.
In the late 1990s Gautam Adani won the rights to operate Mundra port . . . © AFP via Getty Images
. . . located on the mangrove-lined Gujarat coast on the Arabian Sea © AFP via Getty Images
“A number of corporates which are in high yield do access [international] debt capital
markets, even in India,” he adds, pointing to a $1.4bn bond issued by Vedanta, the
Indian mining company, in August.
The question is whether Mr Adani can maintain the extent of his interests in Indian
infrastructure, with some suggesting his political connections could become a liability.
“If Modi loses on election day 2024, you’ll see the [Adani] stocks will correct
immediately,” says an investment analyst in Mumbai. “If your protector gets
dislodged then you lose access to that capital.”
But for others, Mr Adani has become too big to fail. “He’s become one of the most
powerful men in India in the space of 20 years,” Mr Buckley says. “What he touches
turns to gold.”
Copyright The Financial Times Limited 2020. All rights reserved.

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11/15/2020 ‘Modi’s Rockefeller’: Gautam Adani and the concentration of power in India | Financial Times

The Big Read Indian business & ﬁnance

‘Modi’s Rockefeller’: Gautam Adani and the concentration of power in

Some argue the concentration of economic power in family-run conglomerates is a

The Adani Group declined to comment for this article.

Twice weekly newsletter

While it has been a good year for India’s solar

International investors are paying attention.

In response to land acquisition allegations, Adani Power said in a statement earlier

Though India’s sovereign debt rating is at risk of a downgrade to junk status — a

Copyright The Financial Times Limited 2020. All rights reserved.

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