Adani, SEBI rows rewrote corporate narratives amid declining governance standards in 2024

The year 2024 proved challenging for Indian corporations, marked by widespread profit declines and operational difficulties.

India’s corporate landscape was also overshadowed by two high-profile controversies that called into question the integrity of governance and regulatory oversight in the country. The Adani Group, already under scrutiny from global watchdogs, faced a fresh barrage of legal challenges in the United States. At the same time, Madhabi Puri Buch, the chairperson of the Securities and Exchange Board of India (SEBI), was embroiled in allegations of conflict of interest. These intertwined developments set the tone for a year where trust and transparency became critical themes across India’s corporate ecosystem.

Also read: Rahul Gandhi demands Adani’s arrest over US bribery indictment

Trouble in Adani land

Even as the year was winding down, reports about US prosecutors charging Gautam Adani, his nephew Sagar Adani, and other top executives with orchestrating a $265 million bribery scheme shook the Indian corporate sector. The indictment alleged that the group secured solar energy contracts in India by bribing government officials while misleading the US investors about its compliance and anti-corruption practices. Filed in the Eastern District of New York, the charges included violations of the Foreign Corrupt Practices Act (FCPA) and securities fraud.

As expected, the Adanis refuted the allegations that bribes were paid. The legal case is expected to take a couple of years before it comes to a conclusion. The group’s attempts to secure international funding stalled, with several financial institutions re-evaluating their exposure to the conglomerate. However, the damage extended beyond Adani itself, as the controversy fuelled broader debates about corporate governance standards in India. For many, the case underscored systemic vulnerabilities in oversight mechanisms and the need for greater transparency from India’s largest corporates.

SEBI chief under fire

Meanwhile, Madhabi Puri Buch, SEBI’s trailblazing chairperson, faced allegations of conflict of interest and financial ties that cast a shadow over the regulator’s impartiality. Critics pointed to her alleged connections with ICICI Bank and offshore funds linked to the Adani Group, claiming that these relationships compromised her ability to oversee investigations into Adani’s alleged financial misconduct.

Congress spokesperson Pawan Khera further alleged that Buch received ₹34 crore in compensation from ICICI entities during her tenure as SEBI chief. These allegations, coupled with questions about SEBI’s handling of the Adani-Hindenburg case, eroded confidence in the regulator’s independence.

Also read: Congress brings fresh charges against Madhabi Buch, another SEBI member

Decline in earnings

The other development that took the wind out of the sails of the corporate sector was, for the first time in eight quarters, Indian corporates reported a cumulative decline in earnings. The Q2 FY25 results revealed a 0.6 per cent year-on-year (Y-o-Y) drop in profits among 1,353 listed companies, signalling a stark reversal from the 47.4 per cent Y-o-Y growth observed in Q2 FY24. This decline underscores the pressures mounting across industries.

India’s biggest corporate, Reliance Industries, reported a 3.62 per cent decline in net profit to ₹19,101 crore for the quarter ended September 2024, while the FMCG giant Hindustan Unilever experienced a 3.86 per cent drop in standalone net profit, amounting to ₹2,612 crore. One of the backbones of the economy, the automotive sector contributed to a significant portion of the decline; the sector saw profits tumble by approximately 15 per cent, exacerbated by supply chain disruptions and increased input costs.

However, corporate expenditures rose sharply, growing at 8.6 per cent in Q2 FY25 compared to a modest 1.5 per cent in Q2 FY23. Rising raw material and labour costs were primary contributors, squeezing industry margins and limiting profitability. Economic uncertainty prompted many companies to impose strict budget constraints, significantly curtailing their ability to invest in hiring or operational improvements. Approximately 71% of firms reported implementing hiring freezes or reducing headcounts, prioritising cost reduction over expansion.

Skills shortage

An ongoing skills shortage further complicated hiring efforts, with 75 per cent of employers reporting difficulties in filling critical roles. The lack of qualified talent delayed key projects and undermined operational efficiency. The Consumer Confidence Index (CCI) hovered around 50—below the threshold, indicating optimism—reflecting economic instability and diminished purchasing power. This wavering confidence led to lower demand for goods and services, discouraging companies from expanding their workforce or operations.

Persistently high inflation, at 6.5 per cent as of October 2024, impacted consumer spending and corporate margins. Rising input costs, particularly for raw materials and labour, further strained profitability, compelling companies to adopt more conservative financial strategies. These negative parameters showed up in GDP growth, which was the slowest in 21 months at 5.4 per cent, reflecting broader economic uncertainties, including global market volatility and domestic inflationary pressures.

Also read: Demand for JPC probe into Adani issue: INDIA bloc MPs protest in Parliament complex

Record IPO activity

India emerged as the global leader in initial public offerings (IPOs), surpassing the US with 327 new listings. Landmark IPOs included Ola Electric, which garnered substantial investor interest despite operational hurdles, and Bajaj Housing Finance, which raised ₹6,560 crore amidst strong market confidence. This IPO boom reflects India’s growing appeal as an investment destination, though concerns about valuation bubbles persist. However, Hyundai Motors’ IPO nearly tanked soon after it got listed on the bourses.

The Hyundai Motor India IPO, which raised ₹27,870.16 crore through an Offer For Sale of 14.22 crore shares, was launched in October 2024 and became one of the largest IPOs in Indian history. Despite being oversubscribed 2.37 times, with strong interest from institutional investors, retail participation was weak at only 0.5 times. Upon its debut on October 22, 2024, the stock listed at ₹1,934, slightly below the issue price of ₹1,960, and subsequently fell by as much as 7.2 per cent on its first trading day. As of early November 2024, Hyundai's shares were trading around ₹1,814, reflecting a decline amid cautious investor sentiment towards new listings.

Policy reforms

The Indian government’s decision to abolish the Angel Tax was hailed as a landmark reform aimed at attracting foreign investment into the startup ecosystem.

This move is expected to bolster funding for innovation and entrepreneurship, positioning India as a global startup hub. Regulatory actions extended to fintech, with the RBI banning Paytm Payments Bank's select services over money laundering concerns. This sent ripples through the sector, highlighting vulnerabilities in compliance and governance among new-age financial entities.

Bomb scare

By late October 2024, Indian airlines reported over 999 bomb threats, with more than 500 occurring in just the last two weeks of October. This marked a dramatic escalation compared to previous years; from 2014 to 2017, only around 120 hoax threats were documented. The sheer frequency of these incidents in 2024 created widespread disruption and fear among travellers.

Also read: 2024: The year India turned IPOs into a national obsession

On the brighter side, India’s aviation sector experienced a record passenger traffic surge, exceeding 225 million travellers in 2024. While IndiGo retained its dominance with a 60 per cent market share, new entrants like Akasa Air intensified competition. The other development that made headlines was the merger of full-service carrier Vistara into Air India. It remains to be seen whether Vistara’s quality service will rub off on Air India.

High inventory levels

Tata Motors acquired Ford India’s Gujarat facilities to expand its EV portfolio, while Mahindra partnered with Volkswagen to co-develop EVs. Maruti Suzuki’s investment in battery manufacturing marked another step towards electrification.

By October 2024, passenger vehicle inventory reached unprecedented levels of 80-85 days, translating to nearly 7,90,000 unsold vehicles valued at approximately ₹79,000 crore (about $9.5 billion). The surge in raw material prices, including steel and semiconductors, increased vehicle costs, making them less affordable for price-sensitive buyers. This led to slower retail movement despite robust wholesale dispatches.

As 2024 draws to a close, the trajectory of Indian corporates hinges on their ability to navigate complex regulatory environments, rebuild trust, and adapt to evolving global dynamics. The lessons of this year—rooted in the need for transparency, accountability, and strategic foresight—will undoubtedly shape the contours of India’s corporate landscape in the years to come.