The Hindenburg Research report that not only shook the shares of Adani Group stocks but also the entire stock market of India challenged the collective wisdom of some of the smartest institutions of the world: The rating agencies.
So let me argue forcefully.
While many felt the report was the finest piece of research to have hit an Indian company, a very strong section of the market also felt the two-year-long investigation – as claimed by Hindenburg Research – had a deadline to meet. The idea was to rattle India’s largest Follow-on Public Offer (FPO) by Adani Enterprises to raise Rs 20,000 crore.
So what happened once the report hit the social media. Within two trading sessions since the publication of the report, the Sensex lost hundreds of points that dented the savings and investments of millions of Indians. It also dampened the mood in the street ahead of the crucial budget. The timing of the attack by Hindenburg Research could not have been worse for India’s optimistic investors.
Let’s dig deep. The report served old wine in the new bottle. Worse, Indian analysts and investors – surprisingly – fell for it. The ones impacted badly were those who invested in Adani Group companies. Remember these very companies have been rated stable by the likes of S&P Global, Fitch Rating, Moody’s, CRISIL, ICRA, CareEdge, Acuite and Brickwork among others. So, for me, this raises a million dollar question. Who should be trusted by Indian investors – Hindenburg Research or credit rating firms of international repute?
Now let me come to the second argument. The Adani Group has attracted a slew of strategic investors and partners who look for long term gains based on their forensic audits into the companies instead of googling for short trades.
Adani Group companies have attracted investors and partners such as food processing and investment holding company Wilmar that has one of the largest market capitalisations on the Singapore Exchange (SGX).
Then there is Total Energies, one of the world’s largest energy companies, both ranked high on the Fortune 500 list.
In the last couple of years Gautam Adani attracted Qatar’s sovereign wealth fund QIA to make its largest investment in India.
Around the same time, International Holding Company PJSC (IHC) , an Abu Dhabi based conglomerate, announced to invest a couple of billions of dollars as primary capital in three Adani portfolio companies.
World’s 3rd largest container shipping company and French giant CMA CGM formed a joint venture with Adani Ports in 2017.
And thirdly, Hindenburg Research is silent about the quality of lenders who have put in their money into Adani Group of companies that have reduced their dependence on Indian public sector banks year on year.
Rather, Hindenburg Research is questioning the analytical capabilities of lenders like JP Morgan, Citi, Bank of America, Credit Suisse, BNP Paribas, Siemens, QNB, Emirates NBD , DBS and Standard Chartered among other such large institutions. These are very demanding institutions when it comes to compliances in the wake of the subprime crisis of 2008.
According to analysts, close to three fourth of Adani Group’s debt comes from private lenders from India and internationally.
So these maddening arguments and counter-arguments need to stop. Trigger-happy analysts and stock market influencers should act responsibly in reacting to hit-and-run reports by research firms that are in the market to make a quick buck through information warfare instead of offering any fundamental clarifications.
It would be interesting to see how Adani Group manages to come out of this turmoil in the interests of retail investors and its FPO that is already oversubscribed by the institutional investors.
In the age of jet-speed information, there is a larger need for vigilance against foreign intervention, especially for a rapidly growing economy like India.
Shantanu Guha Ray is a Wharton-trained journalist and award-winning author. He lives in Delhi with his wife and two pets. He won the 2018 Crossword award for his book, Target, which probed the NSEL payment crisis.)