Gautam Adani had it coming. No one — not even fellow Gujarati Dhirubhai Ambani — has amassed so much wealth in such a short time. Not unlike Dhirubhai, whose proximity to the Indira Gandhi establishment was well-known, Gautambhai too left behind the old and established moneybags — not only in India but in all of Asia — to figure at number three in the global rich list. Undeterred by criticism, and barely concealed hints of official patronage, he went on to acquire more and more companies, some through the merger and acquisition route, others by outbidding rivals in public auctions. Admittedly, he had been in business before 2014, but it was only after Narendra Modi’s graduation to New Delhi that his fortune multiplied at supersonic speed. Even before the US-based Hindenburg Research accused the Adani group of “brazen stock manipulation and accounting fraud scheme over the course of decades”, there was hush-hush talk about artificial inflation of the group company stocks at the bourses. Also, there were well-documented reports in the financial press of the highly-leveraged group whose debt skimmed dangerously close to unsustainable limits. Yet, the response was dismissive: everything was hunky-dory with the finances of the group and the scary reports was the handiwork of the rivals harbouring malice aforethought.
However, last week the feigned nonchalance of the group was exposed as hubris. Following publication of the Hindenburg Report, the listed companies in the Adani conglomerate have been hammered mercilessly at the stock exchange. The combined loss in market value was about $ 50 billion. Hindenburg Report while putting out its expose said that they have short-sold Adani group bonds on the New York stock exchange. The free fall in Adani shares continued disregarding the clarification issued by the group. Broadly, it denied any wrong-doing without touching on the specifics. The threat of defamation against the Hindenburg Report was met by a counter-challenge to sue them in the US. The timing of the report was doubly troublesome for the group since it directly impacted its flagship company Adani Enterprises’ Rs 20,000 crore follow-on public offering. On Friday the stock was quoting at Rs 2,762, below the Rs 3112-3276 price band set by the issuer. This is an immediate headache for the company. Either they have to reduce the asking price or withdraw the issue under extraordinary developments. At the current price band the Adani group is courting disaster which might impact the share price of the group companies.
Old-timers recall how, in the early 1980s, a group of bears out to stop the fast-rising Reliance group shorted its shares. The wily Dhirubhai countered, getting unnamed friends to purchase the company’s shares. On the day of the settlement there was intense speculation whether he could come up with Rs 21 crore — that was roughly the value of shares purchased by his friends — and a cheque for the amount was presented to the BSE. Dhirubhai never looked back after that, while the bears were taught a lesson. However, there is a huge difference between the early ’80s and now. There was no market regulator like SEBI then; insider trading was a public secret since no law existed to stop it. And there were no Foreign Institutional Investors. Government-friendly businessmen like Dhirubhai Ambani nudged the few public sector entities such as the now defunct UTI and the LIC to bolster their shares. Mr Ambani did not have to reckon with the regulatory structures put in place post-liberalisation.
Mr Adani, thus, has to be watchful of the regulatory stipulations and a hostile domestic and foreign press which, because of his reported proximity to the current regime, would evince a great interest in his next moves. Compounding his trouble is the general downturn at the bourses. FIIs pulled out over Rs 50,000 crore from the market in the last two trading sessions. Whether it was the budget to be presented on February 1 spooking the markets, or a considered correction, the run on the Adani group shares can be scotched only if Gautam Adani offers a convincing counter about the health of his empire. Meanwhile, an Ambani has once again reclaimed his old position at the top of the rich list.
