Adani affair, a test for India Inc

SUBHASHIS MITTRA- Wide Angle

Once ranked number one among the richest in India and Asia’s wealthiest, Gautam Adani, the Chairman of Adani Group, is now India’s second richest and the third richest Asian. Adani’s net worth has fallen sharply from $124 billion on January 17 to $61.3 billion as of February 3. Now, he is no longer the world’s third richest person.

 

The steep decline in Adani’s fortune comes as a result of the Adani Group companies shedding $108 billion in market value since Hindenburg Research accused it of stock manipulation and accounting fraud. He has tumbled to 21st spot on the Bloomberg Billionaires Index. 

 

Hindenburg, the US-based short seller with its 103-page scathing report revived old doubts about corporate governance at the Adani conglomerate. Adani’s long 412-page rebuttal has failed to reassure investors as Adani Group companies’ stocks continue to hit lower circuits almost everyday. 

 

In the wake of the allegations leveled by Hindernburg, Adani has gone from being the biggest wealth gainer in 2022 to becoming the biggest loser on Bloomberg’s rich list this year.

 

In the eye of a storm in Parliament, Adani dismissed claims regarding his association with Prime Minister Narendra Modi behind his rise to become Asia's richest person – a title he lost followed by a staggering stock rout.

 

He termed the claims “baseless” and said that the fact that both him and the PM are from the same state makes him an “easy target” for such allegations.

 

Opposition parties in the Lok Sabha and the Rajya Sabha have called for a discussion and investigation into allegations of fraud against the Adani Group that triggered a bloodbath at the stock market.

 

Leaders of 16 opposition parties met in the chamber of the Leader of Opposition in the Rajya Sabha, Mallikarjun Kharge, amid calls for a probe.

 

The parties are demanding a discussion on the risk to Indian investors from the plunge in shares of the Adani Group's ports-to-energy business empire, which counts the state-run Life Insurance Corporation of India (LIC) and the State Bank of India (SBI) among key investors,

following fraud claims by US short-seller Hindenburg Research. They also asked for an investigation by a parliamentary panel or a Supreme Court-appointed committee.

 

However, a top Finance Ministry official asserted that the risk to the state-run Life Insurance Corporation of India (LIC) and State Bank of India from the Adani Group's stock market plunge is limited.

 

"SBI and LIC's exposure to any given company is far below the level where it should be a concern to any investor in the banks or in the insurance policies. It is tiny. The fate of one company will not affect any of these institutions significantly and therefore there is absolutely no cause for concern for either depositors or policyholders or investors in any of the nationalised banks or insurance companies," Finance Secretary TV Somanathan said.

 

The Reserve Bank too said India's banking sector is resilient and stable, and the central bank maintains constant vigil on the lenders.

 

Responding to media reports expressing concern about the exposure of Indian banks to a "business conglomerate", the Reserve Bank said in a statement that it is constantly monitoring the banking sector. However, the RBI did not name the Adani Group.

 

Amid claims from Hindenburg Research that Adani has engaged in stock manipulation and accounting fraud, the Adani Group's finance chief has called the Hindenburg report a "malicious combination of selective misinformation and stale, baseless and discredited allegations that have been tested and rejected by India's highest courts".

 

Whatever may it be, it is indeed a defining test for India Inc.