KUALA LUMPUR - Few places encapsulate the questions swirling around Indian tycoon Gautam Adani like the Mundra power plant - a coal-fired colossus that for years has burned through money.
This crown jewel of his power company, which can light up millions of homes, has more liabilities than assets and has run up US$1.8 billion (S$2.4 billion) of losses.
To paper over the deficit, Mr Adani has deployed more than US$1 billion (S$1.3 billion) of creative debt financing and reassured investors and lenders that profits will come soon.
But Adani Power's auditor cannot fully make sense of the maths underpinning this claim - and neither can accounting experts who spoke to Bloomberg News.
The divergence is a microcosm of the battle playing out in real time and spectacular fashion between Mr Adani's sprawling empire and investors swayed by Hindenburg Research's claim that the billionaire is behind "the largest con in corporate history".
Mr Adani has denied the shortseller's accusations of stock manipulation and accounting fraud. Still, companies in his conglomerate lost as much as US$153 billion in combined market value after Hindenburg's salvo, though they bounced back last week.
At the core of investors' skittishness is the debt-fuelled and intertwined nature of how the Adani empire bankrolls its titanic expansions. The Mundra Thermal Power Plant and its debt, which experts say seems designed to shield Adani Power from extraordinary writeoffs, regardless of the unit's losses - exemplifies this balancing act, where a single asset write-down could have cascading ramifications.
"In the light of the circumstances, impairment probably would have been prudent," said Dr Alastair Lawrence, an associate professor of accounting at the London Business School.
Adani Power did not reply to an e-mail with detailed questions for this story, nor to a dozen follow-up phone calls since Wednesday.
This story is from the March 07, 2023 edition of The Straits Times.
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This story is from the March 07, 2023 edition of The Straits Times.
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