An Attack Like No Other

It was on 25 Jan 2023, exactly a year ago, when news arrived at breakfast that a short-seller in New York had put up online a compilation of allegations against the Adani Group.

Fatuously self-styled as a ‘research report’, it contained the same dead allegations that my detractors had been trying to resurrect by flogging them through their allies in the media. In all, it was a cunningly crafted set of selective half-truths sourced from disclosed and publicly available information.

Lies and baseless allegations against us were nothing new. So, after issuing a comprehensive response, I thought no more about it.

However, a lie had crossed the world even as truth was lacing up its shoes! For me, having been raised on a staple diet of the power of truth, this attack was a lesson on the power of falsehoods.

The impact of short-selling attacks is normally limited to the financial markets. This, however, was a unique two-dimensional attack – a financial one, of course, and also one that played out into the political space – each feeding off the other. Aided and abetted by some in the media, the lies against us were corrosive enough to substantially erode the market cap of our portfolio as, typically, capital markets are more emotional than rational. What pained me even more is that thousands of small investors lost their savings. Had our detractors’ plan fully succeeded, the domino effect could have crippled many critical infrastructure assets, ranging from seaports and airports to the power supply chain – a catastrophic situation for any country. However, thanks to our solid assets, the robustness of our operations and the high quality of our disclosures, the more informed financial community, including lenders and rating agencies, refused to be swayed by the swirling lies and stood solidly with us.

We had no precedent path to handle this situation. Ultimately, our confidence in the solidity of our businesses dictated our largely contrarian strategy. Our very first decision was to protect our investors. After completing the FPO of INR 20,000 crore, we decided to return the FPO proceeds. This move, unprecedented in corporate history, underscored our commitment to investor welfare and ethical business practices.

In the fog of this war, our biggest weapon was adequate liquidity. To augment our strong cash reserves of INR 30,000 crore, we further fortified our financial position by raising an additional INR 40,000 crore, equal to the debt repayment for the next two years, through stake sales in our Group companies to investors of immaculate global standing, like GQG Partners and the QIA. This served the objectives of readying an expansive war-chest of cash reserves, restoring confidence in the markets and creating world-class infrastructure assets for India.

By pre-paying INR 17,500 crore of margin-linked financing, we insulated and ring-fenced our portfolio from market volatility. I asked my leadership team to focus on businesses. This catalysed a record- breaking EBITDA growth of 47% in the first half of FY24, with the Adani portfolio delivering its highest-ever quarterly profit in Q3 FY24. Our bat was doing the talking.

We executed an extensive engagement program for our financial and non-financial stakeholders. The finance team alone conducted close to 300 meetings across the world in the initial 150 days, ensuring the affirmation of ratings across 104 entities by nine rating agencies. Banks, fixed income investors, sovereign wealth funds, equity investors, JV partners and rating agencies have always been our key stakeholders, for it is the due diligence, scrutiny and reviews they conduct that underpin our comprehensive and transparent disclosure regime.

We focused on transparently outlining the facts and narrating our side of the story to expose the motives of those who attacked us. This led to a declining influence of negative campaigns against our Group. A testament to the change in public perception is the significant growth in our shareholder base, a primary target of the Follow-on Public Offering. Over this challenging year, our shareholder base expanded by 43%, reaching nearly 70 lakh.

Additionally, we remained committed to maintaining our growth momentum. The Group continued its investments, evidenced by our asset base growth to INR 4.5 lakh crore. This period marked the launch of several key projects, including the world's largest renewable energy generation site in Khavda, a new copper smelter, a green hydrogen ecosystem, and the long-awaited redevelopment of Dharavi.

In hindsight, the crisis uncovered a fundamental weakness that I had let grow – we had not paid enough attention to our outreach mechanisms. Few outside the infrastructure finance community knew of the size, scale and quality of what the Adani Group had done or was doing. We had all along naively believed that all our non-financial stakeholders too knew us and the truth about us – that our financials were robust, that our governance was impeccable, that our roadmap to growth was measured, and that we play an important role in building India’s critical infrastructure.

This experience underscored the necessity of engaging effectively with our non-financial stakeholders. We had failed to proactively counter the twisted narratives of our debt levels and unfounded accusations of political partisanship, resulting in the spread of distorted perceptions.

The fact is that, for our class of transport and utility companies, we have one of the lowest Debt-EBITDA ratios. (For the half year ending Sep 2023, this was 2.5x.) Further, with an infrastructure business footprint in 23 Indian states governed by political parties across the spectrum, we are truly politically agnostic.

The trials and tribulations of the past year have taught us valuable lessons, made us stronger and reaffirmed our faith in Indian institutions. While this devious attack on us – and our strong countermeasures – will no doubt become a case study, I felt compelled to share my learnings because, it was us today, it could be someone else tomorrow. I am under no illusions that this is the end of such attacks. I believe we have emerged even stronger from this experience and even more unwavering in our resolve to continue our humble contribution to the India growth story.

(The author is Chairman of the Adani Group.)