- The entire global community must have been in awe of the way the Adani group rose spectacularly reaching dizzying heights in the last few years. No wonder, the Gautam Adani-led group became the envy of business enterprises around the world overshooting to the summit of the top behemoths in a blind. Of course, Indians around the world were feeling proud of the rise giving them something to boast about unabashedly. Mind you, we all indulge in proclaiming proudly how inspirational such success stories are for the present generation even though the majority may not be directedly affected by the riches. Who cares so long as we have the bragging rights to showcase how the country is progressing competing against the best in the world?
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- Let’s look at how the Adani group has positioned itself against the damning report from Hindenburg Research. Almost a week after the report was published questioning the group’s corporate governance standards, Adani Enterprises successfully closed its follow-on public offering of Rs 20,000 crore recently. Hearteningly for the Adani Group, institutional investors and corporates led the buying while retail investors were unenthusiastic – the stock closed 4% lower than the floor price of the FPO. Mind you, Hindenburg admittedly had an interest in Adani group securities as it had short-sold them in overseas markets. Its report also said that the questions were posed vis-à-vis the valuation of Adani securities overseas.
- Somewhat disconcertingly, it’s the reaction in India that indirectly poses questions to India’s regulators and the regulatory guidelines. Recollect how over three trading days till Monday, a total of Rs 5.56 lakh crore, or 29%, of the group’s market value in Indian stock exchanges was wiped out. For sure, Adani has replied to the Hindenburg report. That, however, did not reassure enough investors in India. Note that Hindenburg’s modus operandi is not unusual in developed markets. As we know, short sellers do raise inconvenient questions and at times push regulators to take action against some companies.
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- As India’s large conglomerates tap funds from overseas markets by listing their securities there, they should be prepared for greater scrutiny from a variety of market participants. India Inc’s Western counterparts are not spared. Fluctuating share prices of listed Adani group companies have grabbed the most attention. That’s a symptom, the real question is for India’s regulators. Listed companies have extensive compliance requirements. Yet the behaviour of Adani stocks suggested that not many take the compliance outcome at face value. Agreed, credible public regulators are good for the private sector. Nonetheless, the Adani group needs to regain investors’ trust because what is at stake is India’s economic potential to attract capital flow.
