In what it described as the “worst-case scenario”, CreditSight said “overly ambitious debt-funded growth plans could eventually spiral into a massive debt trap”, which may lead to parts of the group falling into financial distress or defaulting – and weighing heavily on India’s economy given their sheer size.

What’s behind Adani’s gravity-defying ascent?

Adani’s meteoric rise has been driven by the soaring share prices of his namesake group’s seven listed companies – as his family own up to 75 per cent of each. The combined market value of those companies rose tenfold over the past three years to US$220 billion.

Equity research house Equitymaster said investors have been in a “frenzy” over Adani stocks, partly due to investors suffering from “FOMO” (fear of missing out) while others “probably think he is too big to fail now”.

At the same time, it said the group’s companies are trading “at valuations far higher than the industry average, indicating they are highly overpriced … even if you factor in their phenomenal growth, leadership status, or the fact the businesses are aligned” with Prime Minister Modi’s nation-building vision.

Adani has gone from college dropout to India’s No 1 for port and airport infrastructure; private thermal power generation; gas distribution; and solar power – to name but a few. His group is now diversifying into media, data centres, digital technology services, cement and other areas at breakneck speed.

Hardly a week goes by without Adani announcing a deal or an expansion that CreditSights said is “primarily supported with debt”. The group is “increasingly venturing into new and/or unrelated businesses, which are highly capital-intensive,” the report said, a decision that “raises concerns regarding spreading execution oversight too thin”.

Adani also announced plans for a US$5.2 billion aluminium refinery in eastern India. In the 12 months to May, he spent at least US$17 billion on acquisitions, according to Bloomberg.

Meet the only Asian to have ever broken into the world’s richest top 3

While these acquisition announcements have become almost routine, the group roused controversy last week when it launched a hostile bid for India’s first 24-hour news channel, NDTV.

The bid ties in with Adani’s recent media moves and, with no deep-pocketed white knight for the outlet in sight, it’s expected to succeed. But the business mogul’s close ties to Modi have raised concerns about whether NDTV will be able to maintain its editorial independence.

Since Modi’s Bharatiya Janata Party took power in 2014, Indian broadcasters have increasingly toed the government line. But NDTV still has a reputation for impartial reporting – leading opposition Congress party spokesman Jairam Ramesh to condemn Adani’s takeover bid as a “brazen move to control and stifle any semblance of an independent media” being carried out by the prime minister’s “khaas dost” (special friend).

By the time he had befriended Modi, Adani was already a successful businessman, and grew his net worth to an estimated US$7 billion by 2014. But it was only after the BJP leader became prime minister that Adani’s fortunes really took off.

Modi famously travelled to New Delhi in an Adani private jet following his 2014 election win, underlining the pair’s closeness.

Adani aims to become the world’s biggest renewable energy producer by 2030 with some US$70 billion in green-energy infrastructure investments. The clean-power focus has made Adani Green Energy his most valuable company by market capitalisation.

Investors in Adani Green have reportedly seen profits of 7,850 per cent over the past five years, with shares in the company delivering returns of 73 per cent this year alone.

But there’s a downside: the company has the second-worst debt-to-equity ratio in Asia at 2,021 per cent, only slightly better than China’s Datang Huayin Electric Power Co., which has a ratio of 2,452 per cent.

‘It’s too much’: As India swelters, the poorest suffer most

The Adani Group hasn’t offered a response to the CreditSight report. Shares in the group’s companies stumbled slightly after the report’s release, but have since rallied strongly.

“Our scale, our diversified business, and our track record of performance positions us very strongly to continue to perform well in a variety of market conditions,” Adani told shareholders in July, emphasising that the group’s success “is based on its alignment with the India growth story.”

‘A goose that lays golden eggs’

Politicians and market-watchers have over the years raised worries about the Adani Group’s debt load, complex shareholding structures and the unusually scant number of analysts providing research on its stocks. Lenders appear confident the group can manage its debt-heavy balance sheet though. “They do have capital backing,” said Pramod Kumar, investment banking head at Barclays India.

Importantly, the Adanis can say they’ve never defaulted on a loan. The group’s synchronicity with government development policies is another confidence-booster, as is its ability to attract big-ticket investors such as the Abu Dhabi-based International Holding Company.

While CreditSight said it takes “comfort in the group’s solid relationships with both domestic and international banks”, the Congress party has accused the government of “pressuring banks” to grant the group loans, putting both those financial institutions and the economy at “colossal risk”.

Ventura brokerage in July noted the group’s “huge capex” (capital expenditure) plans and said “net debt is expected to increase considerably”. But it also said it was confident about Adani’s talent for implementation and ability to unlock asset value, calling his group “a goose that lays golden eggs”.

Adani’s surge in wealth has left fellow Indian corporate titan Mukesh Ambani far behind. Ambani, another Gujarati, was the richest Indian for 14 years before being dethroned by Adani.

He’s now 9th richest globally, worth US$94 billion, according to Bloomberg. Ambani’s wealth has grown sharply, too, from 2014 when he was worth around US$24 billion. His businesses also dovetail with Modi’s emphasis on infrastructure.

Clash of the streaming titans: can India’s Ambani beat Netflix, Prime, Disney+?

But the investment style of Ambani, whose energy-to-telecoms group Reliance Industries Ltd boasts impressive credit metrics, is seen as more conservative than Adani’s.

Deven Choksey, general manager of KRChoksey Investment Managers, described Adani as a businessman who “has remarkable conviction as an entrepreneur and the capacity to expand after taking a calculated gamble”. Adani in 2013 summed up his philosophy as: “Either you sit on a pile of cash or continue to grow.”

CreditSight said the group right now “enjoys a strong relationship” with Modi’s government and is benefiting from “policy tailwinds”. As long as that favourable configuration continues, investors look set to bet its shares will keep delivering rich returns too.