Adani’s $4.1 billion wealth surge in 8 months fuels Narendra Modi attacks

New Delhi: Indian billionaire Gautam Adani’s wealth has tripled since Narendra Modi became the top opposition party’s prime minister pick eight months ago, fuelling campaign attacks over the Gujarat chief minister’s plans to bolster Asia’s third-biggest economy.

Adani, a 51-year-old native of Gujarat state, has seen his fortune triple to $6 billion as of 2 May from $1.9 billion on 13 September, according to the Bloomberg Billionaires Index, equivalent to $25 million per day in a nation where some 800 million people live on less than $2. The surge has spurred criticism from ruling party campaign chief Rahul Gandhi, who says it shows that Modi’s policies will benefit the rich at the expense of India’s poor.

The attacks highlight the type of opposition Modi would face as India’s leader to any business-friendly moves aimed at reviving economic growth from the lowest in a decade. Modi improved access to electricity, built more roads and eased investment approvals after taking power in Gujarat in 2001, providing a platform for growth for companies in the state such as Adani Enterprises Ltd.

“The political fallout of these relationships really depends on the strength of his political opposition should Modi come to power,” said Nikita Sud, an associate professor of development studies at the University of Oxford, who wrote a book on Gujarat. “While a big Modi victory would make it far easier for him to enact his proposals,” she said, a strong opposition means all legislation will be scrutinized.

Shares surge

Since Modi became chief minister of Gujarat 13 years ago, Adani Enterprises’s shares have risen about 85-fold, while the benchmark Sensex index grew about eight-fold. The stock has tripled to ₹ 426.25 since Modi was named prime ministerial candidate on 13 September, the eighth-fastest gain in that time among the 500 members of the S&P BSE 500 index.

“Investors believe the Adani Group has enjoyed tacit political support from Modi,” Surya Narayan Nayak, head of equity research at Sun Capital Advisory Services Pvt., said by phone, adding that he doesn’t have a rating on the stock. “They think that support would further be cemented if Modi manages to form the government.”

Other individuals and Gujarat-based entities have also experienced growth since Modi was named as a prime minister candidate. Mukesh Ambani, India’s richest man and chairman of Reliance Industries Ltd (RIL) , has seen his wealth increase 11% to $22 billion from $19.8 billion since 13 September, according to the Bloomberg Billionaires Index.

Land purchases

An index of eight Gujarat-based companies, including Atul Ltd and Welspun Corp., has more than doubled since 13 September. The Sensex has climbed 14% in the same period.

Gandhi, along with Aam Aadmi Party (AAP) leader Arvind Kejriwal, say the Gujarat government gives preferential treatment to Adani, citing an alleged sale of land to him for as little as one rupee ($0.02) a square meter.

Adani has denied the allegation, telling CNN-IBN in a televised interview broadcast on 28 April that he bought the land for an average of ₹ 15 per square meter, and that he paid as little as ₹ 0.1 per square meter for land when Gandhi’s Congress party ruled the state in the 1990s. Adani said it wasn’t fair to compare the value of the land before and after it was developed.

‘Not BJP’s ATM’

“Adani Enterprises’s fundamentals haven’t changed since September and the surge in its share price occurred because of market speculation,” according to Devendra Amin, a company spokesman. He declined to comment on claims that Adani will benefit if Modi becomes prime minister. Adani declined to be interviewed on the surge in wealth and opposition attacks over his relationship with Modi.

“I have never received any special treatment from Modi, nor do I expect any,” Adani told CNN-IBN in the interview broadcast on 28 April. In any of his discussions, Modi always talks about policy matters and never about individual companies. I am not BJP’s ATM machine.

“Adani didn’t receive much formal education, and started off trading diamonds for a few years before joining his older brother’s plastics company,” according to an article posted on the website of Adani Ports and Special Economic Zone Ltd. Adani began trading plastics, and eventually started his own company called Adani Exports.

Crown jewel

Adani then turned his attention to building a port on Gujarat’s Arabian Sea coastline, which has welcomed traders from Europe and the Middle East since at least the 12th century. Initial attempts to do so via a tie-up with Minneapolis-based Cargill Inc.—at a time when the state was led by the Congress party—failed.

In 1995, Adani formed a venture with Gujarat’s state government to build Mundra, a port that now handles everything from automobiles to coal for power plants.

“Before Modi, Adani was small—just one among hundreds of companies emerging in Gujarat,” said Ramesh Bansal, a member of the Board of Trustees at Kandla Port, which sits about 50 miles south of Mundra and is operated by the federal government. Now he owns the busiest port in the region, which is the jewel of his empire.

Gujarat has made money off the port venture, earning at least ₹ 200 crore in 2006 for the sale of an 8.6% stake in Adani Ports and Special Economic Zone Ltd, a unit of Adani Enterprises, The Economic Times reported at the time. That price amounted to 14 times more than the state government paid for the shares in Mundra port, the article said, citing H.K. Dash, chief executive officer of Gujarat Maritime Board.

Share sale

Adani in 2007 said the state government divested its holdings for ₹ 120 a share, compared with its original investment of ₹ 10 apiece, according to an article posted on Adani Ports’s website.

B. Ravi, Adani Ports’s chief financial officer, confirmed the date of the sale by phone. He said he wasn’t aware of the value. Anil Mukim, Gujarat’s principal secretary for revenue, was not available to comment, according to his office assistant, who said Mukim was on holiday.

Adani’s company has seen exponential growth during the tenure of Modi, who has trumpeted his record in Gujarat—a state that has long expanded at a faster pace than the national average—as a key reason people should vote for him in elections ending 16 May. Most polls show his Bharatiya Janata Party (BJP) winning the most seats while falling short of a majority.

‘Undue benefit’

At the end of the 2002 financial year, six months after Modi took power, Adani Enterprises had total assets of $375 million and a market capitalization of $73 million, according to data compiled by Bloomberg. At the end of fiscal 2013, total assets had risen more than 50 times to $20.6 billion, and as of yesterday it had a market value of about $7.8 billion.

“No leader of any state has had such a massive impact on modern India,” Adani said of Modi at a 2013 investor summit called Vibrant Gujarat. Modi has led a transformation of Gujarat that the people of the state continue to benefit from.

Politicians aren’t the only source of criticism of Adani’s links with Modi’s Gujarat administration. India’s national auditor, a constitutional body, in 2012 said in a public comment that Adani Power Ltd, operator of the world’s largest coal- fired power plant, received an undue benefit from the state government, which failed to collect the full penalty for a breach in the terms of a power purchase agreement.

Modi record

State-run Gujarat Urja Vikas Nigam Ltd recovered only ₹ 800 million from Adani Power of a penalty that the auditor said should’ve amounted to ₹ 240 crore based on the power purchase agreement. The auditor rejected an argument from the government that a reduced penalty was agreed upon because of differing interpretations of the deal. Amin, the Adani Enterprises spokesman, declined to comment on the penalty.

Modi, when asked about his ties to Adani in an 20 April interview with ABP News, said his government was incorruptible. Jagdish Thakkar, a spokesman for Gujarat’s government, didn’t answer six calls made to his mobile phone over the past three weeks.

Modi’s identity is a government where you can’t find any middlemen, the chief minister told ABP News, according to a transcript. People of India can proudly say there is a government which can’t be pressurized, which can’t be managed. My 14-year track record speaks for me.

If Modi becomes prime minister, he’ll lack the same tools he has as Gujarat’s leader to aid investments from private companies. While the federal government can give tax incentives to industries and environmental permits for specific projects, India’s constitution gives state leaders power to provide land- use permits along with electricity and water supply.

‘Real winners’

Gandhi has referred to Adani at nearly every campaign rally in the past month as opinion polls show his Congress party headed for its worst-ever showing. Kejriwal, Aam Aadmi’s leader, has made similar barbs.

Modi asks you to give him the keys to the country. But if he is given the key, industrialists like Adani will be the real winners, Gandhi said at a rally in Uttar Pradesh on 24 April. The Congress thinks that not one, but several industrialists should be produced.

Congress has faced its own allegations of favouritism. The BJP has said Robert Vadra, the son-in-law of party president Sonia Gandhi, used political connections to obtain building permits at below-market rates and sold them on to real estate companies. Priyanka Gandhi, Vadra’s wife and Rahul’s brother, has denied any wrongdoing. Vadra didn’t answer several calls placed to his mobile phone on Monday.

Power proximity

Adani Enterprises’s revenue has increased over three years to ₹ 46,460 crore in fiscal 2013 from ₹ 26,410 in fiscal 2011, while Adani Ports’s profit has increased every year since fiscal 2007, to ₹ 1,620 crore from ₹ 190 crore, according to data compiled by Bloomberg.

Adani, despite all the criticism levelled against him, has a track record of executing projects within time, without any cost overrun, V.K. Vijayakumar, an investment strategist at Geojit BNP Paribas Financial Services Ltd in the southern Indian state of Kerala, said by phone, adding that he doesn’t have ratings on Adani stocks. His competence must be recognized, though the proximity to power may have helped.

Adani Power has outperformed Indian rivals, including Reliance Power Ltd. and Tata Power Ltd, to become India’s largest private electricity producer. The group is also among India’s biggest importers of coal.

A strong parliamentary mandate for Modi will boost India’s economy, according to Madan Sabnavis, chief economist with Credit Analysis and Research Ltd.

“Adani has certainly benefited from economic growth in Gujarat, but that’s how growth works,” Sabnavis said. “There will be companies that profit.” Bloomberg