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Gautam Adani, Chairman of Indian conglomerate Adani Group, speaking at the World Congress of Accountants in Mumbai on 19 November 2022. Credit – Indranil Mukherjee — AFP/Getty Images
When you’re the richest man in Asia, logically the only way out is to go down.
The Indian mogul said a Jan. 24 report by Hindenburg Research, a New York-based forensic investigative firm and short-seller, called a “brazen stock manipulation and accounting fraud” amounting to “the biggest fraud in corporate history.” After decades of arguing, it remained upset. ”
Adani Group, India’s largest conglomerate spanning ports, airports, manufacturing and energy, has denied the allegations and threatened to file a lawsuit against Hindenburg.
Yet, according to Forbes, the allegations will remove more than $66 billion in market value from Adani’s business empire by Monday and more than $30 billion from founder and chairman Gautam Adani’s personal fortune. Lost. This was reportedly the worst economic hit the Asian billionaire has ever suffered, slipping him from third to ninth on the world’s richest list.
The Indian market halted the sale of some of its Adani shares on Friday to stem a crash, and the company responded Sunday with a 413-page rebuttal to the allegations. Indian regulations require listed companies to have at least 25% external shareholders, but Mr Hindenburg said many shares in Adani Group’s subsidiaries are owned by offshore companies operated by Adani’s minions in places such as Mauritius and Singapore. Claims to be held by a shell entity. Hence the ability to borrow and leverage. In response, Adani called Hindenburg’s accusations “unfounded and discredited” and “a selective regurgitation of public disclosures or rhetorical innuendos coloring rumors as facts”.
Given the huge role the Adani group plays in the Indian economy, the controversy has political ramifications for Prime Minister Narendra Modi, who, like Gautam Adani, hails from the western Indian state of Gujarat. Known to have a close relationship, Modi flew Adani Group’s planes during his victory in the 2014 prime ministerial election. Environmental watchdog AdaniWatch.
Ultimately, however, accusations of government collusion against the Adani Group’s alleged misconduct could do the most damage, undermining investor confidence in India’s $3.2 trillion economy. According to Hindenburg’s report, “the problem of corruption permeates multiple levels of government,” blaming the Securities and Exchange Board of India (SEBI) in particular. Adani is correct in stating that many specific charges within the Hindenburg report have already been investigated and resolved by Indian courts. It shows a lack of trust in
“This presents a significant risk to not only the Adani Group, but to the whole. [Indian] said Hemindra Hazari, an independent bank and economic analyst. “Hindenburg openly says your regulators are protecting perpetrators rather than punishing them. The market recognizes guilt by penalizing stock prices.”
Adani, 60, is perceived to be closer to Modi than any other Indian oligarch. Born into a textile merchant family in Gujarat, he spent his early career as a scooter-riding plastics merchant after dropping out of his college. He then dabbled in precious gems before hitting his big break with the development of the deep-sea port of Mundra, India’s largest commercial port today.
Adani has expanded its holdings in infrastructure, logistics and energy, especially coal-related businesses. Today, he is often referred to as India’s ‘coal tycoon’, but more recently he has also made his way into the media. In December, he controversially increased his stake in New Delhi Television, an iconic Indian television station known as NDTV and one of the only mainstream broadcasters still critical of the Modi government. rice field.
How much damage the Adani controversy will do to India’s national finances is hotly debated. On Friday, shares of Indian banks and Indian life insurance companies plunged. Jairam Ramesh, leader of the opposition Congress Party, emphasized that state-owned banks are lending twice as much to the Adani Group as private banks. “This irresponsibility has been exposed [Indians] We are at financial risk,” he said in a statement.
Still, while noting that the total debt of the top five Adani group companies has doubled in the four years to March last year, Hong Kong brokerage firm CLSA said Indian banks accounted for less than 38%. , said it borrows mostly through bonds and commercial paper. , financial institutions, and intergroup loans. “India’s banking system is relatively insulated from potential downside risks,” CLSA said.
However, the risk of contagion and discredit to Indian stock exchanges is still very real. The timing of the allegation, which comes just before the sale of his $2.5 billion stake by the group’s flagship Adani Enterprises Ltd, in what would be India’s largest additional public offering to date, has been particularly damaging. increase.
“We need to closely track all public sector banks. [public sector undertakings] We are currently investing in Adani shares to boost the stock price.” murmured Activist and lawyer Prashant Bhushan on Monday. “These chairs and directors must be held accountable for putting our money at risk.”
This presents options for the Modi government. Try to restore investor confidence through a thorough house cleaning, risk alienating powerful allies, or side with Adani and dismiss the allegations as a malicious alien conspiracy. Arguably, the Adani Group’s counter-argument has already played the cards of nationalism, calling the Hindenburg Report “a calculated attack on India, the independence, integrity and quality of Indian institutions, India’s growth story and ambition.” I’m in
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