Indian Tycoon’s Conglomerate Shaken by Market Rout

The conglomerate controlled by Gautam Adani, the politically connected Indian industrialist, lost about $50 billion in value this week after it was upended by a small investment firm in New York.

Late in the day on Tuesday, Hindenburg Research, a firm that made its name by betting against cryptocurrency companies and unprofitable electric vehicle makers, published a report accusing the billionaire tycoon’s company, the Adani Group, of “a brazen stock manipulation and accounting fraud scheme.” After an initial market wobble on Wednesday, trading paused on Thursday, when markets in India closed for the country’s annual Republic Day.

But when trading resumed on Friday, some of Mr. Adani’s companies dropped 20 percent in frenzied trading, the maximum allowed by exchanges, before trading was halted. India’s benchmark stock index fell 1.6 percent that day, its worst drop in more than a month. Overall, the Adani Group lost about a fifth of its value since the Hindenburg report was released.

The Adani Group has dismissed Hindenburg’s allegations in a series of rebuttals, calling them “a maliciously mischievous attempt” to profit by sinking its shares. “The volatility in Indian stock markets created by the report is of great concern and has led to unwanted anguish for Indian citizens,” the company’s legal chief said, and threatened to sue.

Hindenburg is what’s known on Wall Street as a short seller, which makes money via investments that pay off when a company’s share price falls.

The speed and scale of the Adani Group’s losses mirror, in miniature, its rise to international prominence. In the 1980s, Mr. Adani founded a polymers import-export business that became the basis for his conglomerate, which today encompasses holdings in ports, power, food and more. The group’s growth surged in recent years, as it expanded into airports and renewable energy.

Mr. Adani, 60, became Asia’s richest person. Last summer, he surpassed Mukesh Ambani, another empire-building tycoon from the state of Gujarat, according to the IIFL Wealth Hurun India Rich List.

Apart from the wild swings in the value of his companies, what stands out about Mr. Adani is his close connection to Narendra Modi, India’s prime minister. Both came up in Gujarat, and their fortunes have been tied together ever since.

Mr. Ambani, the second-generation boss of India’s other most powerful conglomerate, is also close to Mr. Modi and his government. But unlike Mr. Adani, Mr. Ambani — and his father before him — had relationships with political leaders from many factions among many parties. Mr. Adani is much more closely affiliated with Mr. Modi’s success in particular.

Mr. Adani was an early supporter of Mr. Modi’s “Vibrant Gujarat” campaign, which established him as a champion of economic growth after his image as the state’s leader was damaged by the Hindu-Muslim riots of 2002. After winning power in the national elections of 2014, Mr. Modi flew to Delhi on Mr. Adani’s private jet.

Critics have complained that Mr. Adani’s businesses have enjoyed unfair favor under Mr. Modi’s administration. Mr. Adani has pointed out that he does business everywhere in the country, even in states where Mr. Modi’s party is out of office. But the leader of the government of one of those states, Kerala, said that Mr. Modi and Mr. Adani were taking over its airport to “create a special monopoly in this sector according to their interest.”

Many investors in India were already familiar with allegations made by Hindenburg, at least as rumors. Some institutional investors, both in the United States and in India, have been wary of Adani Group companies’ shares, some of which trade at extraordinarily high valuations relative to their earnings.

But India is one of the world’s fastest-growing large economies, and Mr. Modi retains a tight grip on political power. Even after this week’s market plunge, Mr. Adani’s conglomerate is worth far more than it was just a few years ago.