When new york Reports from short sellers wiped about $150 billion, or two-thirds, of the total value of Adani Group’s listed holdings in late January and early February, with several major problems keeping the Indian company up at night. Will Indian banks and insurers with major ties to port-to-power conglomerates also falter? Will the contagion spread to the rest of the Indian financial world? Will the Indian government aggressively investigate allegations of fraud and stock market manipulation by short sellers that have caused confusion (accusations strongly denied by Adani Group)?
One and a half months on, the answer to the first two questions is “no”, which is pleasing to India. The answer to the third question is less clear and less constructive: the government does not appear to be eager to resolve the issue, perhaps because Adani’s modest free float means that a small number of mostly large shareholders are suffering a lot And the angry throngs of retail investors are urging Delhi to get to the bottom of it. With those big questions out of the way, attention turns to the next conundrum: Can the Adani Group and its eponymous tycoon founder Gautam Adani recover? Or will they fail, potentially derailing the Indian government’s grand plans to invest in infrastructure and green energy?
The past month has given hope to those who support Mr Adani and his businesses, which run some of India’s largest ports and airports, store a third of food and run a fifth of its electricity transmission lines , producing vast quantities of cement — and eyeing clean hydrogen and steelmaking, among other ventures. The group’s total market capitalization has recovered from a low of $82 billion to more than $110 billion. Shares in its flagship public company, Adani Enterprises, are up 54% from their Feb. 27 nadir. Yields on bonds issued by some Adani companies have fallen from levels that signal trouble.
A major turning point in the fate of the Adani Group occurred in early March, after QUR Partners, a US-based, Australia-listed fund run by an Indian, bought $1.9 billion worth of shares in several of the group’s companies directly from the Adani family. then, QUROwner Rajiv Jain, who lives in Florida, told Financial Times “The market has mispriced Adani” and praised the group’s “very capable management” and “excellent” execution.
Mr. Adani used the proceeds to help repay $2.1 billion in margin loans that used Adani shares as collateral, alleviating a possible source of financial stress. Another $1.1 billion, half from the Adani family and half from cash flow from Adani Enterprises, was used to pay other recent liabilities. The moves reduced the group’s outstanding debt by just 4% to $27 billion. But they eased the pressure and calmed the market. The buyout group has decided to suspend new capital investments beyond what it has already committed to, as well as large acquisitions, until September 2024.
With these displays of financial discipline, the Adani Group embarked on a global charm offensive that was due to wrap up in California on March 17. It seems to be working.Mr Jain once said QURThe stake in the Adani business “is likely to increase, depending on price and delivery method”. The group said it had received significant interest from investors looking to put money into its various companies. The company said recent news reports that its cement business was selling slightly less than 5% were false. But it did not rule out the possibility of selling some of its stake in the unit. Some of these businesses, like the port business, are solid businesses that offer predictable returns — and maybe even decent ones, if the Indian economy continues to grow at its recent 7-9% annual rate.
As the Adani Group takes hold, another question is bound to arise: How long can Mr Adani hold back his nation-building ambitions? On March 1, his conglomerate won a piece of bauxite at a government auction. Currently, the company has been planning to bid for assets that will be incorporated into Adani Enterprises’ mining subsidiary. But before short sellers attacked, the bid for the mine was widely seen as part of a larger plan to move into aluminum smelting, steelmaking and other heavy industries. Mr Adani is unlikely to abandon the idea for good. ■
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