Wednesday, July 24, 2024

Hindeburg on Adani: A case of compromised research

Hindeburg on Adani: A case of compromised research

We have known all these facts about Adani group for many years now:

1- The fact that all companies are over-leveraged is NOT an unknown fact. It goes with the territory; 

2- That fact that various banks have given loans to the group companies is also in public domain.

3- The fact also remains in public knowledge that Adani debt has higher portion of private sector Indian banks and foreign financial institutions than PSU banks.

It is expected that private sector banks and Foreign institutions would use a microscope for finding weaknesses ( by way of extensive research) before giving out large loans. Does Adani own these banks in the private sector?

4- The fact that majority of top leadership positions in Adani companies are held by Adani family members and very close associates (mostly relatives- immediate and extended family members) is also a known fact. What’s new in that?

5- The fact that PE ratio of all companies is mind boggling and dizzying is also in public domain. 

The moot question is if these prices are being manipulated by Adanis themselves?

It looks very difficult. What it means that you buy your own stocks to pump up market cap. This can happen in two cases:

  1. if you want to soar the prices and exit before the scrip falls. This doesn’t look plausible;

OR

b) you want to take loans by pledging your own shares as collateral. If this is the reason, then we expect all the lenders to carry out reasonable research before investing. 

As I said earlier that majority of debt of Adani companies is owned by private sector Indian banks and overseas financial institutions who are strong on researching before lending.

6- If most of Adani stock is owned by Shell companies of Adani in tax-havens, and if most Adani cos are just good on paper, why would the Shell companies invest in bad companies? If you know that the alcohol you manufacture is substandard, why would you drink your own alcohol, especially if you are loaded with money?

So the question is why this Hindenburg report?

1- To ensure that the biggest Follow on Public Offer (FPO) of India is knocked out.

2- To build anti-Government sentiments and causing bloodbath in Indian markets. 

3- The fall of stocks all across will lead to flight of capital from India & will weaken the Rupee ₹ that is now stabilising.

Final question- Who benefits?

1- The party that is out of power obviously;

2- The economies that have been recently overtaken by India in GDP terms;

3- The markets that wants flight of capital from Indian to their own markets;

4- Most importantly the Hindenburg research company is an active player in stocks market and can make a tidy fortune for itself and its friends by taking a short sell position on Adani stocks;

So shouldn’t Hindenburg research paper be a fit case of ‘conflict of interest’ ?

(Dr Sudhir Bisht (PhD) is a long-time presence in national and international companies in oil retail sector as well as in Telecom infra sector. He has also been an author and a consummate writer in the digital world, including on rediff.com, for over two decades now)

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