New Delhi: The Congress party has demanded that the SEBI and the RBI conduct investigations into the findings of an US-based investment research firm, Hindenburg Research, that in a report alleged corporate malpractice, stock price manipulation, and very high levels of debt by the Adani Group.
Congress’ General Secretary (Organisation) Jairam Ramesh Friday said that while a political party would not be reacting to a research report on an individual business group, the Adani Group is “no ordinary conglomerate”.
“It (Adani Group) is no ordinary conglomerate: it is closely identified with Prime Minister Narendra Modi since the time he was Chief Minister,” said Ramesh, in a statement.
Hindenburg has put out a damning report on the Adani group which has reacted predictably. Here is my statement on this serious matter that requires a thorough investigation in the public interest. pic.twitter.com/gfmgmKPx4e
— Jairam Ramesh (@Jairam_Ramesh) January 27, 2023
The Adani Group had Thursday responded to the report terming it “maliciously mischievous and unresearched”.
“The maliciously mischievous, unresearched report published by Hindenburg Research on 24 January 2023 has adversely affected the Adani Group, our shareholders and investors,” said Adani Group Head – Legal, Jatin Jalundhwala.
Meanwhile, the Congress warned that the “high exposure” of financial institutions such as the Life Insurance Corporation of India (LIC) and the State Bank of India (SBI) to the Adani Group “has implications for financial stability” and for the crores of Indians whose “savings are stewarded by these pillars of the financial system”.
“It is worth noting that earlier reports had described the Adani Group as ‘deeply over leveraged’. The allegations require serious investigation by those who are responsible for the stability and security of the Indian financial system, viz. the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI),” read the statement.
This ‘irresponsibility’ has exposed Indians to ‘financial risk’
Claiming that state-owned banks have lent “twice as much to the Adani group as private banks, with 40% of their lending being done by SBI”, Ramesh underscored that this “irresponsibility” has exposed Indians who have poured their savings into LIC and SBI to “financial risk”.
The Congress leader also hit out at “rise of Modi’s cronies” saying Indians need to understand “how this has been financed by their own hard-earned savings”.
“If, as alleged, the Adani Group has artificially inflated the value of its stock through manipulation, and then raised funds by pledging those shares, banks such as SBI could face heavy losses in the event of a fall in those share prices. Indians are increasingly aware of how the rise of Modi’s cronies has exacerbated the problem of inequality, but need to understand how this has been financed by their own hard-earned savings. Will the RBI ensure that risks to financial stability are investigated and contained? Are these not clear-cut cases of “phone banking?” the statement read.
He further stated that the Adani group had “built monopolies in ports and airports and become an overwhelmingly dominant player in power, roads, railways, energy and media.”
“The Hindenburg report alleges ‘brazen stock manipulation’ and ‘accounting fraud’ by the Adani Group via ‘a vast labyrinth of offshore shell entities’,” he added.
Highlighting the economic liberalisation of 1991, the Congress leader mentioned that the reforms were aimed to “improve transparency and to level the playing field” for domestic and foreign investors.
“For all its posturing about black money, has the Modi government chosen to turn a blind eye towards illicit activities by its favourite business group? Is there a quid pro quo? Will SEBI investigate these allegations to the fullest and not just in name?” asked Ramesh.
He further accused the Modi government of exposing India’s financial system to “systemic risks” through large investments in the conglomerate via state financial entities.
“The allegations of financial malfeasance would be bad enough, but what is worse is that the Modi government may have exposed India’s financial system to systemic risks through the liberal investments in the Adani Group made by strategic state entities like LIC, SBI and other public sector banks,” the Congress leader said.
The statement further read: “These institutions have liberally financed the Adani Group even as their private sector counterparts have chosen to avoid investing because of concerns over corporate governance and indebtedness. As much as 8% of LIC’s equity assets under management, amounting to a gigantic.”
Calling out the “close relationship between Adani Group and the current government”, Ramesh also questioned whether the Modi govt can simply dismiss the “damning report” as “malicious”.
“We fully understand the close relationship between the Adani Group and the current government. But it is incumbent on the Congress party as a responsible opposition party to urge SEBI and RBI to play their roles as stewards of the financial system and to investigate these allegations in the wider public interest,” Ramesh said.
“The Modi Sarkar can try and impose censorship. But in an era of globalisation of Indian businesses and financial markets can Hindenburg-type reports that focus on corporate misgovernance be simply brushed aside and dismissed as being ‘malicious’,” the statement concluded.