Why Downfall Of Adani Group Will Not Stop Expansion Of Other Indian Giants Worldwide – Analysis


By Zhou Chao and Kung Chan

Earlier this year, the American investment consulting group the Hindenburg Initiative Research and Reporting made headlines by releasing a research report claiming the prominent Indian entrepreneur Gautam Adani’s company, the Adani Group, of fraud and stock price manipulation.

This report caused an uproar in the financial world. In the aftermath, Adani-related companies witnessed an extended period of declining stock prices, resulting in the collective market capitalization of these publicly listed firms plummeting by over USD 150 billion at its lowest point. In response to this crisis, the Adani Group promptly implemented debt reduction measures and actively courted foreign investors, notably including the Qatar Sovereign Fund. These strategic moves led to a notable recovery in the market value of Adani Group companies, with an increase of approximately USD 40 billion.

However, after the dust seemed to settle, the Organized Crime and Corruption Reporting Project (OCCRP) published a new investigative report in August, revealing that Nasser Ali Shaban Ahli from the United Arab Emirates and Chang Chung Ling from Taiwan had been trading Adani Group stocks worth hundreds of millions of dollars for years. OCCRP noted that these two individuals had long-standing business dealings with the Adani family, serving as directors and shareholders of Adani Group companies. They also had significant connections with companies under Vinod Adani, the brother of Gautam Adani. OCCRP’s documents showed that Chang and Ahli had spent years trading Adani stocks through offshore shell companies to obscure their tracks and earn substantial profits. As of March 2017, Chang and Ahli’s offshore companies had invested USD 430 million in Adani company stocks, constituting 100% of their investment portfolios.

Simultaneously, both individuals were paying Vinod Adani’s companies for investment advice through their management firms. These allegations further fuel suspicions of internal corruption within the Adani Group. The Securities and Exchange Board of India has initiated a review of the group, and the latter announced its withdrawal from a series of infrastructure projects launched by the Indian government. As it stands, this massive conglomerate is embroiled in a predicament with an uncertain future. However, a review of the Adani Group’s development journey reveals that Indian companies like the group have already posed a significant challenge to the continuous advancement of China’s Belt and Road Initiative (BRI).

The Adani Group was established in 1988 as a regular trading company. In 1990, after establishing its own port in the Mundra region of the Gujarat state, the Adani Group gradually expanded its focus into the port infrastructure, operations, and logistics industries. As of 2022, the group has evolved into a major Indian multinational corporation spanning various sectors, including infrastructure, logistics, and renewable energy, with an annual revenue of USD 33 billion and over 20,000 employees worldwide. It owns 13 premium seaports distributed along the eastern and western coastlines of India. India has had a complex interdependence between politics and business, with Indian industrialists and business conglomerates deeply embedded in the country’s power structures and development strategies. The Modi government has adopted a development strategy that mirrors the rise of South Korean conglomerates, aiming to support the growth of large corporations such as the Adani Group.

The group’s more remarkable achievements perhaps lie in competition with China. In July 2022, a consortium led by the Adani Group won the privatization tender of the Haifa Port in northern Israel and completed the acquisition of the port along with the local logistics company, Gadot, for USD 1.15 billion. Adani Group also outbid China in a tender for the Colombo Port in Sri Lanka. In August 2016, under pressure from India, Sri Lanka changed the permanent land use rights given to China in the Colombo Port City project from 20 hectares to a 99-year lease. In October 2021, the group signed a strategic cooperation agreement with the Sri Lanka Ports Authority.

The Adani Group collaborates with the local company John Keells Holdings to invest approximately USD 650 million in developing and operating the Colombo Port West Container Terminal for 35 years, after which it will be handed over to the Sri Lanka Ports Authority. The group is also actively competing with China in Egypt, and is in the final discussions for the acquisition of the ports of Kavala, Volos, and Alexandroupoli in Greece. India is also exploring the possibility of using the Greek port of Piraeus near Athens as an export route to Europe. Once completed, Greece will solidify its position as a central transport hub for India to Europe. In summary, large Indian multinational corporations like Adani will continue to be key competitors to China’s BRI in the present and future, with their impact expected to persist and strengthen.

First of all, Indian businesses stand to receive significant support from Western countries led by the United States on a global scale. For the U.S., the perception of China as the foremost threat among Western nations has led to the measures taken to curb and contain its growth. This has become a resolute strategic imperative for the U.S. The “risk mitigation” policies of the European Union, along with a series of strategic moves by Japan, South Korea, and Southeast Asian countries, all indicate that the U.S. and its allies will spare no effort in concretizing this strategy.

As a country engaged in fierce geopolitical confrontation and competition with China, India is an ideal proxy for the U.S. to pursue its strategy in the Indo-Pacific region. At the beginning of this year, the U.S. and the EU signed a series of economic, trade, and technology cooperation agreements and memoranda of understanding with India, significantly strengthening the economic, trade, and technology relations. The U.S. has given the green light to India in critical areas like aircraft engine technology. It can be foreseen that in the future, India will receive a series of technology transfers and support from the West, particularly in key areas like energy transition, thereby enhancing its position and competitiveness in technological competition with China, exerting pressure on the latter.

Furthermore, during specific investment negotiations, Western countries have a significant boosting effect on Indian companies. According to media reports, during the competition for the Israeli port of Haifa, the U.S. political establishment exerted pressure on Israeli authorities from various levels to ensure that the Adani Group secured the bid, leading to the exclusion of Chinese companies. Additionally, to facilitate the import of Bangladeshi electricity into Nepal through India, the U.S. Millennium Challenge Corporation (MCC) established an entity called Millennium Challenge Account – Nepal (MCA-Nepal). This entity has initiated land acquisition and contractor selection procedures. Insiders revealed that six Indian companies are participating in the contractor bidding process. This model of infrastructure development, led by Western countries but executed by India, is likely to expand further in the future.

Furthermore, for many countries along the regions of the BRI, there is a noticeable sense of caution towards China due to geopolitical factors. Consequently, they are willing to introduce Indian influence to hedge against the risks associated with heavy economic and trade dependence on China. In May of this year, Karan Adani, the CEO of Adani Ports and Special Economic Zone Ltd. (APSEZ), a subsidiary of Adani Group, held a meeting with Vietnamese Prime Minister Pham Minh Chinh in Hanoi to discuss investment matters in Vietnam. According to a statement released by the Vietnamese government after the meeting, Vietnam is willing to create favorable conditions for Indian enterprises, including the Adani Group, to invest in the country. They expressed the hope that the Adani Group would lead the investment in Lien Chieu Port in the central Vietnamese city of Da Nang. The statement also noted that the Adani Group has decided to make long-term investments in the Southeast Asian country’s ports, logistics, energy, and technology, with the total investment potentially reaching up to USD 10 billion in the future. In June of this year, the Department of Economic Affairs (DEA), a subsidiary of India’s Ministry of Finance, signed a memorandum of understanding on financial technology cooperation with the Philippines’ Department of Finance in Manila. Both sides plan to establish a joint working group to promote cooperation in the field of financial technology. The joint working group will have co-chair positions held by deputy-level officials from the finance ministries of both countries, with members including senior representatives from the foreign affairs departments, information technology departments, central banks, financial regulatory agencies, and other relevant bodies. The group aims to develop specific cooperation measures in areas such as innovation technology, financial technology, and digital governance. Indian Ambassador to the Philippines Shambhu S. Kumaran stated that this memorandum aligns with Prime Minister Modi’s decision in 2022 to prioritize financial cooperation as one of the key areas in developing bilateral relations between India and the Philippines. It effectively promotes cooperation between the two countries in areas like digital payments and digital identity, among others. Evidently, in countries that China perceives to be along the BRI, there have now been sentiments of geopolitical rivalry with it, and many are now having a strong demand for cooperation with India in various sectors, from physical infrastructure to financial development. This will bolster the strength of Indian businesses in these fields, as well as the gradual exclusion of Chinese companies from related sectors.

Additionally, the fundamental trajectories of the Indian and Chinese domestic economies imply that Indian businesses will pose a formidable challenge to China’s BRI. According to a report by a research team from Nankai University, private enterprises in China accounted for over half of the total investment in the BRI, making them the driving force in this endeavor. However, since 2016, both the annual number of investment projects and the total investment amount have been steadily declining. By 2022, both figures were less than half of their historical highs. The annual total investment in the BRI by China has also been decreasing. While there are factors related to changing investment priorities, the restraining effect of the overall economic trends on public and private financial resources should not be underestimated. After the end of pandemic-related lockdowns, the sluggish performance of the Chinese economy indicates that both state-owned and private enterprises will gradually lack the necessary financial resources to support their demand for foreign investment and financing. The deepening trend of an aging population has further burdened the Chinese economy. In contrast, India not only exhibits a robust economic trend but also a younger population structure, signifying a more promising overall outlook. Therefore, Chinese companies like Xiaomi, despite facing a challenging situation in India, continue opting to stay in the country. The same is true for various international giants that are also relocating their supply chains to India. The vast and dynamic market in India means that Indian businesses have a richer domestic foundation to support their overseas expansion aspirations and a stronger confidence to sustain their competitive strategies against China.

Now, Adani Group which is closely affiliated with the government has essentially completed the railway and port infrastructure network layout from the Indian Ocean, the Persian Gulf, the Red Sea, the Mediterranean, to the Balkan Peninsula. It has also effectively generated a crowding-out effect on Chinese companies, and this effect is expected to continue and intensify in the future. Such a development will not be good news for China’s BRI projects.

As of the end of August this year, the financial scandal surrounding the Adani Group is still ongoing, and international media continues to relentlessly report on it. Once the related scandals are substantiated, the Adani Group’s stock price is destined to suffer another heavy blow, and its internal disintegration is also a possibility. However, Adani’s market share in India’s domestic market will soon be filled by other Indian giants, and its international footprint will be taken over by other Indian companies as well. A series of factors favorable to Indian companies will persist in the long term, even if Adani is no longer a decisive factor, other Indian companies will still be a formidable force worldwide.

Zhou Chao and Kung Chan are researchers at ANBOUND


Anbound Consulting (Anbound) is an independent Think Tank with the headquarter based in Beijing. Established in 1993, Anbound specializes in public policy research, and enjoys a professional reputation in the areas of strategic forecasting, policy solutions and risk analysis. Anbound's research findings are widely recognized and create a deep interest within public media, academics and experts who are also providing consulting service to the State Council of China.

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