The crisis engulfing India's Adani Group highlights the need for India to further expand its sources of green energy investment and production beyond a heavy dependence on a few private conglomerates, analysts say.
The sector could see a slowdown in investment amid the fallout of the Adani crisis, although experts say that the country's renewable energy industry is in a strong position to withstand any effect.
“The Adani-Hindenburg crisis does highlight the importance of diversifying the sources of investment and financing for India’s renewable energy ambitions,” says Ashwini Kumar, a green hydrogen consultant and climate advocate.
“The Indian energy sector is changing rapidly and the need for fresh and substantial investments limits the number of companies that have the wherewithal to make the required investments in this sector.”
Billionaire Gautam Adani has seen the market value of his listed companies plunge by more than $100 billion since US short-seller Hindenburg Research released a scathing report last month accusing the group of financial irregularities.
The Adani Group has denied the allegations, but the report has rattled investors, led to calls for an investigation and raised questions about corporate governance in India.
While the conglomerate covers a range of sectors in its portfolio, including ports, airports and media, it has become increasingly focused on green energy development in recent years.
This follows the Indian government's plans to increase the role of renewable energy in the country, as its appetite for power grows and the country looks to bring down carbon emissions, with the aim of achieving a net-zero target by 2070.
Prime Minister Narendra Modi's government has said that it is committed to meeting a target of producing 50 per cent of its electricity requirements from renewable energy sources by 2030.
On its website, the Adani Group says it is “a significant contributor to this vision by harnessing the power of solar and wind energy”.
However, Mr Adani has, over the years, made billions of dollars from his coal empire, which has continued to expand, with his group operating mines in India, Australia and Indonesia.
India is the world's second-largest consumer and producer of coal, and Adani Enterprises has emerged as one of the largest developers of coal mines in the country.
The company is also one of the biggest importers of the fossil fuel, which is a major contributor to pollution. Given India's fast-growing appetite for power, the country is not expected to be able to scale back its demand for coal in the near future.
However, as India seeks to increase its green energy production to help meet rising demand, Adani has earmarked $70 billion of investment for the industry, with the aim of becoming the world's top renewable energy producer by 2030.
Adani, which says it currently has 20 gigawatts of renewable energy capacity, is aiming to generate an additional 45 gigawatts by 2030.
Its projects include a solar power plant spread across 1,000 hectares in Kamuthi, in the state of Tamil Nadu, which can generate 648 megawatts.
It further intends to build three giga-factories to manufacture solar modules, hydrogen electrolysers and wind turbines. The group has also said that it plans to produce the world's cheapest green hydrogen.
Adani is one “of the few companies who are progressing rapidly in the green energy space”, says Raghvendra Nath, managing director at Ladderup Wealth Management in Mumbai.
Mukesh Ambani's Reliance Industries and the Tata Group are also among the private companies aggressively pushing ahead with renewable energy development in India.
But following the Hindenburg report, “the future of [Adani], including its work in the green energy sector is unpredictable”, says Ishan Chaturvedi, director and co-founder of Vareyn Solar, a solar energy company based in Jaipur.
“Currently, the green energy sector in India has conglomerate companies as the main players with massive projects in the pipeline,” he says.
“While this propels the country’s green sector forward, it also puts it a bit at risk.
“While we do need conglomerates like these to help the nation with its green energy goals, it is important to diversify and have more players and contributors.”
But India's government has shrugged off concerns that the Adani controversy could hit the renewable energy sector.
“India now has one of the most robust renewable energy capacities in the world,” RK Singh, India's power and renewable energy minister, said in New Delhi earlier this month.
“We have at least 15 to 16 large companies that are of the level of global companies capable of going and investing anywhere. So, [the Adani crisis] will not impact us in any way.”
However, there are already some signs that the crisis triggered by the Hindenburg report is affecting Adani's green energy business.
On Friday, Moody's Investors Service downgraded its ratings outlook for Adani Green Energy to negative from stable.
It also downgraded its outlook for the Adani Green Energy Restricted Group and two subsidiaries of Adani Transmission to negative from stable.
“The change in the outlook to negative on Adani Green Energy considers the company's large capital spending programme and dependence on sponsor support, potentially in the form of subordinated debt or shareholder loans, which will likely be less certain in the current environment,” Moody's said.
The negative outlook also factors in the company's refinancing requirements of about $2.7 billion in the financial year ending March 2025, “and limited headroom in its credit metrics to manage any material increase in funding costs”, the rating agency said.
Moody's had already warned that the controversy is likely to make it more difficult for the Adani Group to raise capital.
Financial index provider MSCI also said it is reassessing the size of some Adani companies' free floats, having said there was “sufficient uncertainty” about some investors in Adani companies.
Meanwhile, France's TotalEnergies said it has paused plans for a possible contract announced last year to produce green hydrogen with Adani.
“It was announced, nothing was signed. It doesn't exist,” Patrick Pouyanne, chief executive of TotalEnergies, said last week.
“Mr Adani has other things to deal with now. It's just good sense to pause things while the audit goes forward.”
The 19.75 per cent stake that the French company has in Adani Green Energy is still worth more than the price it was purchased for, he added.
“Investors, particularly those in developed countries, often have a heightened sensitivity to issues which are widely publicised across all media platforms both in India and abroad, and negative perceptions surrounding these issues can have a significant impact on investment decisions,” says Mr Kumar.
The Adani-Hindenburg crisis “has the potential” to affect investment flowing into India’s green hydrogen industry, he adds.
While the sector will emerge rapidly from the setback, as India's economy expands and its energy needs grow, Mr Kumar says there are lessons to be learnt from the crisis.
“It is essential for India to pursue a diversified approach to its renewable energy ambitions, which includes a wide range of stakeholders and investors, in order to achieve its goal,” he says.
However, some industry insiders argue that Adani's role in India's green energy should not be overestimated.
“I do not see any large implications on Adani Green’s performance impacting the overall India green energy potential,” says renewable energy entrepreneur Tanya Singhal.
"No one player dominates this market solely," she says.
“The investments into renewable energy will continue to flourish given the fundamental economics of renewables in India and the ability to provide power to the grid at prices below conventional power sources."
