The Adani Group Has To Do A Lot Of Explaining
Editor-in-Chief of indiacommentary.com. Current Affairs analyst and political commentator. Author of Cyber Scams in India, Digital Arrest, The Money Trap and The Human Hack
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By Sunil Garodia
First publised on 2023-02-01 06:16:37
About the Author
Editor-in-Chief of indiacommentary.com. Current Affairs analyst and political commentator. Author of Cyber Scams in India, Digital Arrest, The Money Trap and The Human Hack
View all posts by this Author
Gautam Adani has suffered much in the last three or four days. From being the world's second richest person, the hammering of the shares of his group companies took him out of the top 10 after the Hindenburg research report that accused him of fraud. But things started looking positive on Tuesday, the last day of the Rs 20000cr FPO of group flagship Adani Enterprises. Although retail investors gave thumbs down to the issue by subscribing to only 10% of the offer, big-ticket investors, including mega groups from the Middle-East, kept their faith in Adani and the issue was fully subscribed. After Adani bonds also started recovering it was clear that the short-selling crisis had either been managed or blown over for now. The icing on the cake was the acquiring of the strategic Haifa port in Israel for $1.2bn on Tuesday. It showed that despite the negative reports about the group, governments and high net worth investors still had faith in Adani.
But the hornet's nest stirred by the Hindenburg report is not going to come to rest easily. LIC has already asked the Adani group several uncomfortable questions. Sebi has also got into the act and has met ratings firms and has started asking questions about founder's leverage, maturity profile of debts and the liquidity position. The opposition parties have given notice that they will raise the issue in Parliament in the Budget session. In short, the Adani group will have to reply to queries about whether it has spread itself too thin and whether its earnings, now and in the future, are and will be enough to repay its debts while the NDA government will have to reply whether it has shown undue favours to the group. Add to that the question of alleged accounting malpractices and fudgy corporate governance and it is clear that the group has a lot of explaining to do going ahead. As the Hindenburg group rightly said, Adani's response to its report did not address the queries either in their entirety or satisfaction.
The way the Adani group has grown in the last 5-7 years and the way it has borrowed money, it was certain that these questions will be raised. Although there have been murmurs in the past that the group was overleveraged and might fail on repaying its debt, the Hindenburg report put things in black and white and the murmurs have now become pointed questions. The Adani group will have to provide proper answers, which its response to the report has failed to do. It must realize that going ahead it will be under the scanner of all global analysts and half-hearted or evasive answers will only take its stock down further.
