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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