It takes a particularly dramatic event–or series of events–to take over the news cycle the week the Union Budget is presented. The Adani imbroglio did just that. While the Budget and, to an extent, Economic Survey, did make a valiant attempt at taking over headlines, theirs was a short-lived time at the top.
As soon as the immediate analysis was done, media houses across India quickly returned to the sensational ongoing topple of the erstwhile third-richest man in the world, Gautam Adani.
And that is why Adani Enterprises and the continuing assault on it is ThePrint’s Newsmaker of the Week.
413 pages of drama
The week started with a bang. On 29 January, Adani Group released a 413-page response to the various allegations made against it by Hindenburg Research, a United States-based short selling firm. Adani came out with all guns blazing. In its reply, the group claimed to have answered all of the 88 questions Hindenburg posed in its original report that was released on 24 January.
Perhaps Adani Group also felt it could take advantage of the Right-wing social media cohort rallying around it. The company claimed that Hindenburg’s report was “a calculated attack on India” and also the independence, integrity, and quality of Indian institutions.
The fightback didn’t stop there. Adani Group went on to take aim at Hindenburg itself, saying it “has not published this report for any altruistic reasons but purely out of selfish motives and in flagrant breach of applicable securities and foreign exchange laws”.
Also read: How Gautam Adani is helping Modi govt with India’s foreign policy challenges
Hindenburg’s scathing reply to Adani
Hindenburg was quick to respond, publishing its reply to Adani Group on the morning of 30 January. Right off the bat, Hindenburg took on Adani Group’s claims, which equated an attack on itself to an attack on India. “To be clear, we believe India is a vibrant democracy and an emerging superpower with an exciting future,” Hindenburg said, adding that they also “believe India’s future is being held back by Adani Group, which has draped itself in the Indian flag while systematically looting the nation.”
We also believe that fraud is fraud, even when it’s perpetrated by one of the wealthiest individuals in the world, Hindenburg added in its reply. Clearly, this David was not going to take Goliath’s attacks lying down.
The short seller went on to say that “in terms of substance, Adani’s ‘413-page’ response only included about 30 pages focused on issues related to our report.” Indeed, it is worth noting that, in Adani’s lengthy response, the annexures–containing background information on past court cases and judgments–began on page 55.
Hindenburg pointed out that although Adani Group claimed to have answered all of its questions, it had side-stepped the critical issue of Gautam Adani’s elder brother Vinod Adani, his alleged front companies and their alleged dealings with the Adani Group firms.
In what has come to become the hallmark of Hindenburg’s brutal style, it said: “In other words, we are expected to believe that Gautam Adani has no idea why his brother Vinod lent massive sums of money to Adani entities, and no idea where the money originated from.”
If any of that were true, Gautam could have easily cleared up the mystery by calling his brother, Hindenburg further asked in its scathing reply. “Or asking him [Vinod Adani] at the next family dinner, why he has been directing billions of dollars to Adani-controlled entities through a network of opaque offshore shell entities,” it added.
Also read: How to survive a bear attack — lessons for Adani in Ambani’s stock market victory in 1980s
Beginning of turmoil
This was just Monday morning; the week was just beginning.
Throughout Monday and Tuesday, Adani Group managed to rally a fightback against the bears in the stock market, with the Adani Enterprises stock ending both days marginally higher. This recovery must have brought considerable relief for Gautam Adani, coming as it did after a wipeout of about Rs 4.17 lakh crore of value from Adani stocks the previous week.
This relief, however, was short-lived. On Wednesday–Budget day, incidentally–news emerged that Credit Suisse Group AG, a Swiss investment banking firm, had stopped accepting Adani Group bonds as collateral for margin loans given to its private banking clients. While it didn’t come right out to say it, this basically meant Credit Suisse no longer trusted the value of the bonds issued by Adani companies.
This move was followed by more international buzz on the issue. Media houses claimed that there were indications that the Adani Group had allegedly used various shady channels to invest funds in its own follow-on public offer (FPO), another potential sign of weakness and malfeasance.
What followed was the savage destruction of market value for Adani stocks. The Adani Enterprises stock ended the day’s trading session with a massive 28.45 per cent down. Then came the big and surprising news: Late Wednesday night, Adani Enterprises announced they were cancelling their Rs 20,000 crore FPO–the biggest that India had seen–to “protect investors”.
This announcement was unprecedented and embarrassing, and it’s probably not a coincidence that Adani released it at night, long after the stock markets had closed and after most news agencies had wound down for the day.
Take a breath, and drink some water; that was just Wednesday.
If a rising tide lifts all boats, a tsunami drowns them all. Those who could bail out did. On Thursday, news came in that Jo Johnson, brother of former United Kingdom Prime Minister Boris Johnson, had resigned as director on the board of Elara Capital, a UK-based company linked to the Adani Group and one that featured prominently in Hindenburg’s original report.
The same day, Citigroup’s wealth arm said that from 7 February onwards, it would also stop accepting securities of Adani companies as collateral for margin loans.
The blows didn’t stop there. The National Stock Exchange on Thursday announced that it was placing shares of Adani Enterprises, Adani Ports, and Ambuja Cements (an Adani company) under additional surveillance. Internationally, the S&P Dow Jones Indices said it would be removing Adani Enterprises from its sustainability indices “following a media & stakeholder analysis triggered by allegations of stock manipulation and accounting fraud”.
Phew. That’s Thursday done. At the start of Friday, and at the time of writing, the stocks of Adani listed companies continued to plummet, having already lost $120 billion–or around half the Adani Group’s value–since the original Hindenburg report came out. Adani Enterprises’ stock recovered briefly through the day, but ended Friday’s trade down 2.2 per cent.
The week is done, and Gautam Adani must be grateful that stock markets are shut on weekends. But it’s a safe bet that this story still has a way to go. Indian regulators are yet to officially enter the fray.
(Edited by Zoya Bhatti)