While allegations of Adani Group being “the biggest con” in history may be hyperbole, the group may have exploited the weakness around the ESG setting, thus exposing the emptiness of the green bond promise, according to valuation guru and Professor of Finance at the Stern School of Business at New York University, Aswath Damodaran.

It is possible that Hindenburg was indulging in hyperbole when it described Adani to be “the biggest con” in history, but there is another seam or weakness in the global economic setting that Adani Enterprises exploited, “and that is ESG, an acronym far more deserving of the “biggest con” label than Adani, since it is threatening to lay waster to trillions of dollars, not billions. If you review the Adani Web site and sales pitch, it is quite clear that the company learned to play the ESG game well, creating an entire ESG universe to underpin its companies, and exploiting the green bond market, presumably for its green energy business,” Damodaran said.

Green bond issuance

“The notion that a family group that builds ports, airports and gas transmission lines qualifies for green bond issuance, tells you less about the group making the issuance, and more about the emptiness of the green bond promise. In fact, if Adani happens to default on its debt, I hope that it starts with the green bondholders, since I cannot think of a group that deserves default more,” he said.

“A con game to me has no substance at its core, and its only objective is to fool other people, and part them from their money. Adani, notwithstanding all of its flaws, is a competent player in a business (infrastructure), which, especially in India, is filled with frauds and incompetents. A more nuanced version of the Adani story is that the family group has exploited the seams and weakest links in the India story to its advantage, and that there are lessons for the nation as a whole, as it looks towards what it hopes will be its decade of growth,” he wrote in a blogpost.

Highly leveraged?

On allegations that Adani Group is highly leveraged, Damodaran said it is not uncommon for infrastructure companies to borrow money and carry heavy debt loads, especially as they make new investments, on the expectation that as their projects mature, this debt will be repaid as well. “What sets Adani apart though is its scale, since a failure on its part to make debt payments will create ripple effects that are vastly greater than a much smaller infrastructure company,” he said.