Adani Group rout: Where is India going? Why is India’s richest man clinging on, not losing?
The US investment firm published a report saying widespread fraud at the Adani Group, which is a leading power and ports conglomerate in India.
The Adani Group dismissed the report as baseless, saying it accuses them of pulling off the largest con in corporate history.
He founded the Adani Group over 30 years ago and now has a fortune that is tied up in it. While the last week has seen nearly $40 billion wiped from his personal net worth, he is clinging on as Asia’s richest man with $82 billion—$2 billion more than fellow Indian entrepreneur Mukesh Ambani, according to the Bloomberg Billionaires Index.
This is a recipe for a false market in securities to allow the admitted short seller to make a fortune by making bad trades, at the cost of many investors.
Before the rout, which continued on the Mumbai stock exchange on Monday, markets had been cheering for the businessman and his breathless pace of expansion. Investors were betting on the self-made industrialist’s ability to grow his businesses in sectors that Modi had prioritized for development.
It said that this was not merely an unwarranted attack on a specific company but a calculated attack on India’s independence, integrity and quality.
The Indian conglomerate called those questions “rhetorical innuendos coloring rumors as fact.” It then published tables and charts to back up its position.
The 1919 April 13 Jallianwala Bagh protest in Amritsar, India: No surprise for the Indians, but for the Adani Group
The long rebuttal sought to assure investors about their debt, banking relationships and corporate governance practices. Shares in Adani Enterprises, the group’s flagship company, were up over 4% on Monday, but most Adani stocks extended last week’s losses.
The conglomerate’s chief financial officer Jugeshinder Singh compared the Indian market reaction to one of the most horrific events from the country’s colonial past under British rule.
“In Jallianwala Bagh, only one Englishman gave an order, and Indians fired on other Indians. So am I surprised by the behavior of some fellow Indians? No,” Singh told Mint business daily in an interview published Monday.
On April 13, 1919, British Brigadier General Reginald Dyer ordered his soldiers to fire without warning on a peaceful protest of thousands of unarmed people in Jallianwala Bagh, a public garden in the city of Amritsar. They stopped firing when their bullets ran out. The Jallianwala Bagh was an event that happened in Amritsar.
“Adani Group has attempted to conflate its meteoric rise and the wealth of its Chairman, Gautam Adani, with the success of India itself,” it said in a post on Twitter on Sunday.
“The remainder of the response consisted of 330 pages of court records, along with 53 pages of high-level financials, general information, and details on irrelevant corporate initiatives, such as how it encourages female entrepreneurship and the production of safe vegetables.”
A football expert’s view of short-seller betting in the Wall Street tainted by nationalism, and what to do if investors lose their money
A small New York financial researcher dubbed after the 1937 airship disaster is known for taking bold bets against high-flying companies that it thinks are overvalued or both.
It was the first time that a person from Asia had ranked in the top 10 on the list and he was the second-richest person in the world. Adani fell from the fourth to the 11th place over the past week.
In a rebuttal of that rebuttal, Hindenburg said “fraud cannot be obfuscated by nationalism,” and that the Adani Group had ignored “every key allegation we raised.”
You can put it this way: A friend of yours will get a ticket to a football game on Friday. But you suspect the price of tickets may fall due to lack of demand on game day. When you borrow the tickets from your friend, you’ll be able to bring it back to them before the game. You sell the ticket immediately, assuming that the cost of a ticket will be less than $50 on game day. And sure enough, bad weather keeps people at home and the stadium starts slashing prices. You buy a ticket for $30, transfer it to your friend, and pocket the $20 difference (including the fee you paid your friend for the privilege of borrowing).
In practice, firms that specialize in short-selling are often among the most reviled. If the world of Wall Street is a craps table, where one player’s winnings boost everyone else’s, short-sellers are the guys betting against the table.
Wall Street is built to sell securities to the public regardless of quality, so critical research is needed. “The corporate world is rife with fraud, and investors have little protection.”
Short sellers were critical in exposing market frauds like the mortgage fraud that almost brought down the global economy in 2008.
Bad actors in the short seller world can make false claims and try to turn a profit even if it is not true.
Innocent Nightcap: A New Look at the Hindenburg Account of Man-Made, Totally Avoidable Disasters Floating Around the Market
“We view the Hindenburg as the epitome of a totally man-made, totally avoidable disaster,” its website states. “We look for similar man-made disasters floating around in the market and aim to shed light on them before they lure in more unsuspecting victims.”
It is just a bunch of investigative journalists, without the ethical baggage. Journalists can’t have a financial interest in their subjects; short-sellers like Hindenburg do.
Hindenburg won its reputation as a bloodhound for financial malfeasance in 2020, when it accused electric vehicle maker Nikola of lying to investors about its truck’s capabilities. Nikola’s founder was eventually convicted of fraud.
Meanwhile, the negative press comes at a tricky time for Adani, who is aiming to raise $2.5 billion by issuing new shares in Adani Enterprises this month. The offer will close on Tuesday.
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Adani Hindenburg Report Explainer in tl-hnk: An Indian billionaire succeeds in investing in clean energy
His logistics and energy company announced plans to take businesses to the stock market and issue new shares to raise billions to pay down debt. Less than a week later, everything changed.
The director of research at Stoxbox said that markets are driven by sentiment and that the report on Adani group made the sentiment against them worse.
So, how did a relatively young and small New York financial research firm manage to bring the Adani juggernaut to a juddering halt? What happens in the David versus Goliath battle?
In India, where the super-rich have exploded in number, the speed with which he has accumulated wealth is both unusual and extraordinary.
Adani was a first generation entrepreneur who started his career in diamond trading and later set up a commodity trading business.
A year later, the Mdara Port was founded in Gujarat, a state in western India where the businessman and the prime minister of India both hail from. Often called the group’s “crown jewel,” Mundra Port is the country’s biggest commercial port by volume.
He is one of the largest coal producers in India, and also the owner of the most controversial coal mine in Australia, which faced fierce opposition from climate change activists.
While Adani’s empire is built on fossil fuels, the businessman is investing billions of dollars in clean energy, an ambition that aligns with India’s long term climate goals.
Source: https://www.cnn.com/2023/01/31/investing/india-adani-hindenburg-report-explainer-intl-hnk/index.html
Adani Group reopens the discussion on the allegations of collusion between the LIC and LIC, the largest insurance company in India
Critics say his rise has been dominated by crony capitalism. They question whether his empire could survive unscathed if there is a change of government.
Life Insurance Corporation (LIC), India’s largest insurer with over $4 billion invested in the Adani Group, said it will hold talks with the group on the allegations.
“Presently there is a situation that’s emerging and we are not sure what is the factual position … Since we are a large investor, we have the right to ask relevant questions and we will definitely engage with them,” LIC Managing Director Raj Kumar was quoted as saying.
After a tepid start, the offer was fully subscribed shortly before the deadline set for the close of trading in Mumbai on Tuesday. It has given Adani some respite from the stock market turmoil of recent days.
In its response, Adani Group said that the “leverage ratios” of its companies “continue to be healthy and are in line with the industry benchmarks in the respective sectors. “
Adani Group “is not going anywhere,” said Rajat Sharma, founder of financial advisory firm Sana Securities. They are a established group in important businesses.