The Adani-Hindenburg Saga

The withdrawal of the Rs. 20,000 crore FPO by the Adani group was probably the most sensible option the conglomerate exercised after its shares went for a free fall through the issue got subscribed. The group said that it withdrew the FPO to insulate its investors and this is in part, true. Meanwhile, the Reserve Bank of India on Wednesday asked banks to submit a report on their exposure to the Adani group. The big question here is—why did the RBI wait till Wednesday to seek this report? If anything, the entire episode is a telling commentary on the functioning of the regulatory system in our country. Expectedly, the issue has united the opposition in the Parliament which is now demanding a JPC probe or an inquiry under the supervision of the CJI. The fact of the matter, however, remains that the investments of government-owned institutions, such as LIC and SBI are reported to be well under regulated limits. There is no immediate need for the government to step into what is a clash between a short seller like Hindenburg and a business tycoon like Adani. Hindenburg’s accusations can be countered legally by Gautam Adani. The only difficult aspect of this is that judicial challenges in India take generations to be resolved and Hindenburg must be well aware of this. Therefore, Adani will have to fight his legal battles, if he so chooses, in the United States. Then comes the question of whether allegations that could be defamatory about reported violations of Indian laws and manipulation of the Indian system can be fought legally in the United States. In its 413-page rebuttal to the accusations listed in the Hindenburg report, the Adani group termed these charges as an attack on India. It dismissed the allegations as baseless and malicious. What is interesting is that most of the charges against Adani in the Hindenburg report were vague and fell into grey areas of operation. Legal experts say that every entity owned by the Adani group is a listed one and therefore all transactions made by the group are in the public domain. Most “illegal” activities which Adani was accused of are reported to be kosher when it comes to most billionaires. However, the Adani group’s response to allegations listed in the Hindenburg report was equally fuzzy in many ways. The business conglomerate is expected to give a point-by-point rebuttal of each charge made against it to clear the air. Meanwhile, the credit ratings agency Moody hinted that the recent sell-off in Adani group’s shares could reduce the conglomerate’s ability to raise capital though other agencies saw no immediate impact on its ratings. Moody’s, however, added that “the rated entities do not have significant maturing debt until FY2025.” One should stop assuming that an attack on the business interests of Gautam Adani in any way, amounts to an attack on India. After all, India is much larger than a business tycoon and its conglomerate. Neither the ruling BJP nor any of its affiliates have any reason to defend Adani. The West is indeed wary of a rising India and to see an Indian billionaire among the top five in the world may have caused a lot of discomfort in the Western business and political world. Moreover, the timing of the Hindenburg report against the Adani group is also a bit suspect, to say the least. At any rate, one will have to watch how this entire issue pans out in the weeks to come.