Adanigiri
Over the past few decades, India’s growth trajectory and the relationship between the state and private capital has shared traits with Latin America of the 1980s and Russia of the 1990s. For one, an ad-hoc pro-business policy has allowed a few companies to monopolise asset ownership. Second, there has been rent-seeking behaviour – adding wealth without contributing to productivity – at the top with the support of the government while cutting down on competition and the entry of new firms across sectors.
Political economist Atul Kohli, in his work on the politics of economic growth in India between 1980 and 2005, had a detailed insight on the dynamics of the political economy that shaped the growth trajectory during that period. According to Kohli, India’s entry to the global economic landscape in the 1990s was a result of incremental, gradual reforms of the 1980s based on shifts in the relationship between state and private business.According to Kohli, the economic reforms of this period – undertaken more on the capital market side – allowed Indian markets to operate more flexibly in certain sectors (telecom, automobiles, aviation, information technology, construction, consumer goods, among them) with the aim of bringing in private investment opportunities.
From this period, India saw a strengthening of the “state-capital-private business” alliance, often at the cost of the social and economic protection to India’s deeply fragmented labour force.
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03/02/2023
On January 24, Hindenburg Research made wide-ranging allegations that the Adani Group was pulling off the “largest con in corporate history”. It claimed that the conglomerate has over the decades been involved in stock manipulation, accounting fraud, used offshore shells for money laundering and siphoned money from listed companies.
A day after the report’s publication, Adani Group’s chief financial officer Jugeshinder Singh pushed back against Hindenburg’s allegations in a video statement with the Indian flag in the background.
In another statement on Thursday, the Adani Group had framed the Hindenburg report as having harmed Indians. “The volatility in Indian stock markets created by the report is of great concern and has led to unwanted anguish for Indian citizens,” the group said.
On Sunday, in a 413-page response to these allegations of illicit financial activities, the Adani Group instead argued that it was involved in “nation building” and suggested that Hindenburg was deliberately targeting India. “This is not merely an unwarranted attack on any specific company but a calculated attack on India, the independence, integrity and quality of Indian institutions, and the growth story and ambition of India,” the Adani response read.
31/01/2023
The report alleges that the stock values of the Adani Group and thus its ability to raise debt and leverage has been wildly inflated. A valuation of the group at levels more typical of the market and the sectors that it is in, would imply a spectacular devaluation.
The Hindenburg report traces the mechanisms and personal networks through which stock values have been boosted by a group of circular, inside equity stakes:
Unsurprisingly, the opposition Congress party has leapt on the Adani issue. As The Print reports, Party leader Jairam Ramesh has issued a statement.
“State-owned banks have lent twice as much to the Adani group as private banks, with 40 per cent of their lending being done by SBI,” Ramesh said. “This irresponsibility has exposed the crores of Indians who have poured their savings into LIC and SBI to financial risk.”
Congress’s standing is so weak that it is unlikely to pose a real threat. A more serious risk is that the panic spreads from Adani throughout the financial markets, forcing the Modi administration to make painful choices. As Bloomberg reports the shock and anxiety is catching especially amongst global investors who may swiftly reevaluate their weighting of Indian assets.
“The issues strike at the heart of the Indian corporate sector scene where a number of family-controlled conglomerates dominate,” said Gary Dugan, chief executive officer of the Global CIO Office. “By their very nature they are opaque, and global investors have to take on trust the issues of corporate governance.” “After last year’s stellar performance, Indian equities and any high-profile company’s shares are open to downside risk of profit-taking,
by Adam Tooze
30/01/2023
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With Hindenburg, Adani Faces His Stiffest Challenge Yet https://thewire.in/business/with-hindenburg-adani-faces-his-stiffest-challenge-yet
What does the short-seller’s report mean for Adani’s plans to grow through international bonds?
With growth, the group’s borrowing strategy has changed. By 2019, it had begun looking beyond domestic banks, tapping funds from overseas, mostly in the form of bonds, instead....
As Bloomberg columnist Andy Mukherjee wrote: “If Hindenburg is right, then a network of shadowy operators… is exerting outsize influence over India’s markets from overseas in cahoots with corporate honchos back home.”
This process has gone unchallenged by India’s regulators. This abdication in duty is seen in other parts of India’s capital markets architecture as well. Take the now-disgraced Brickwork Ratings. It normalised Adani’s use of borrowed funds as equity...
Weak regulation has allowed Adani to grow unchecked. But now, poor regulators – and the company’s own decisions – have also created room for the entry of a short-seller who thinks the company’s shares are overvalued by 85%.
https://scroll.in/article/923095/from-2014-to-2019-how-the-adani-groups-footprint-expanded-across-india In September and October 2018, the Modi government awarded 126 contracts to firms to set up and operate piped natural gas networks and fuel stations across India. These bids were notable for three reasons. First, the number of contracts given out in these two months was significantly higher than those given in the previous nine years – 35 contracts under the Congress-led United Progressive Alliance government, and 63 contracts under the Modi government until then. Second, the government put these contracts up for bidding even though the networks for transporting gas to these cities and districts are still not in place. ... These gas contracts are part of a larger pattern of growth for the Gautam Adani-led infrastructure conglomerate. One part of the expansion has come through acquisitions.
Shares of Adani Total Gas plummeted 19.65 per cent, Adani Transmission tumbled 19 per cent, Adani Green Energy plunged 15.50 per cent and Adani Enterprises tanked 6.19 per cent on the BSE. https://www.rediff.com/business/report/adani-group-stocks-crash-upto-20-pc-amid-hindenburg-report/20230127.htm
Also, Adani Ports and Special Economic Zone fell 5.31 per cent, Adani Wilmar dipped 5 per cent and Adani Power declined 4.99 per cent. 27/01/2023
रवीश कुमार की बात हो गई सच! मोदी शाह का एक और विकेट गिर गया? जल्दी देखिए। HNP NEWS Jan 28, 2023 https://www.youtube.com/watch?v=8j8_jY90gx4
Comment: MOHAMED SIRAJ DHALAYAT This is a biggest scam by this corporater and our economy will affect a lot. Especially LIC and SBI will encore heavy losses, this is for sure. And important aspects LIC has lots of lots unclaimed amount. This was the target by present central Govt. These people had eye on unclaimed amount, how to grab.
https://youtu.be/ZI1MOlf6KGQ?t=130 Newsense.. Adani fall out..#TVNewsance turns 200! We talk about #HindenburgResearch, how NDTV covered it & more!
Adani vs Hindenburg is front-page news, but what about Adani-owned media houses? https://www.newslaundry.com/2023/01/27/adani-vs-hindenburg-is-front-page-news-but-what-about-adani-owned-media-houses Most newspapers also had full-page ads on the Adani group’s FPO.
ByTanishka Sodhi 27 Jan, 2023
Adani Response to Hindenberg... https://www.youtube.com/watch?v=VJS3ZEpEsqo
21 out of 88 Hindenburg questions disclosed since 2015: Adani Group
These questions are about related party transactions, DRI (Directorate of Revenue Intelligence) and court cases, the Adani group said in a presentation called ‘Myths of short seller’. https://indianexpress.com/article/business/companies/21-out-of-88-hindenburg-questions-disclosed-since-2015-adani-group-8408717/#:~:text=The%20Adani%20Group%20on%20Friday,documents%20back%20from%202015%20onwards. On revenue or balance sheet being artificially inflated, Adani said that out of nine listed companies in the portfolio, six are subject to specific sector regulatory review for revenue, costs, and capital expenditure. The group further reiterated that on governance, four of its large companies are amongst the top 7 per cent of the peer group in emerging markets, the sector, or the world. It added that overall promoter leverage is less than four per cent of the promoter stake.
https://www.bseindia.com/xml-data/corpfiling/AttachLive/227f5520-4cbb-47ca-bcb4-f6957c395762.pdf
Congress Rsponse:
STATEMENT ISSUED BY SHRI JAIRAM RAMESH, MP, GENERAL SECRETARY (COMMUNICATIONS), AICC
January 27, 2023
Normally a political party should not be reacting to a research report on an individual company or business group prepared by a hedge fund. But the forensic analysis by Hindenburg Research of the Adani Group demands a response from the Congress party. This is because the Adani Group is no ordinary conglomerate: it is closely identified with Prime Minister Narendra Modi since the time he was Chief Minister.
Furthermore the high exposure of financial institutions such as the Life Insurance Company of India (LIC) and the State Bank of India (SBI) to the Adani Group has implications for financial stability and for the crores of Indians whose savings are stewarded by these pillars of the financial system. It is worth noting that earlier reports had described the Adani Group as “deeply over leveraged”. The allegations require serious investigation by those who are responsible for the stability and security of the Indian financial system, viz. the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI).
The Hindenburg report alleges “brazen stock manipulation” and “accounting fraud” by the Adani Group via “a vast labyrinth of offshore shell entities”. The evolution and modernisation of India’s financial markets since the 1991 reforms has aimed to improve transparency and to level the playing field for domestic and foreign investors. It has specifically sought to increase the transparency of financial flows into the country — to prevent round-tripping and money-laundering by actors that could include criminals, terrorists and hostile countries — and to reduce dependence on offshore tax havens. For all its posturing about black money, has the Modi government chosen to turn a blind eye towards illicit activities by its favourite business group? Is there a quid pro quo? Will SEBI investigate these allegations to the fullest and not just in name?
The allegations of financial malfeasance would be bad enough, but what is worse is that the Modi government may have exposed India’s financial system to systemic risks through the liberal investments in the Adani Group made by strategic state entities like LIC, SBI and other public sector banks. These institutions have liberally financed the Adani Group even as their private sector counterparts have chosen to avoid investing because of concerns over corporate governance and indebtedness. As much as 8% of LIC’s equity assets under management, amounting to a gigantic sum of ₹74,000 crore, are in Adani companies and comprise its second-largest holding.
State-owned banks have lent twice as much to the Adani group as private banks, with 40% of their lending being done by SBI. This irresponsibility has exposed the crores of Indians who have poured their savings into LIC and SBI to financial risk. If, as alleged, the Adani Group has artificially inflated the value of its stock through manipulation, and then raised funds by pledging those shares, banks such as SBI could face heavy losses in the event of a fall in those share prices. Indians are increasingly aware of how the rise of Modi’s cronies has exacerbated the problem of inequality, but need to understand how this has been financed by their own hard-earned savings. Will the RBI ensure that risks to financial stability are investigated and contained? Are these not clear-cut cases of “phone banking”?
None of this will be easy. In recent years, the Adani group has built monopolies in ports and airports and become an overwhelmingly dominant player in power, roads, railways, energy and media. In perhaps the most egregious case of crony capitalism, the previous operator of Mumbai’s Chhatrapati Shivaji Maharaj International Airport, India’s second busiest airport, was raided by the Enforcement Directorate (ED) and the Central Board of Investigation (CBI) after it rejected an offer by the Adani Group. The operator agreed to sell the airport to Adani a month later and it is a mystery what happened to the ED and CBI cases thereafter.
We fully understand the close relationship between the Adani Group and the current government. But it is incumbent on the Congress party as a responsible opposition party to urge SEBI and RBI to play their roles as stewards of the financial system and to investigate these allegations in the wider public interest.
The Modi Sarkar can try and impose censorship. But in an era of globalisation of Indian businesses and financial markets can Hindenburg-type reports that focus on corporate misgovernance be simply brushed aside and dismissed as being “malicious”?