How Adani’s fall can smash hopes for India as a driver of global economic growth

Adani Group shares fall further, and the market cap drops below Rs 8 lakh crores again.  The group shed nearly Rs 53,000 crore in market value to Rs 7.55 lakh crore on Wednesday after its stocks dropped between 4% and 11%. The group’s flagship, Adani Enterprises, declined 11% to close at Rs 1,400.85, whereas Adani Ports fell 6.72% to end at `544. Adani Power, Adani Transmission, Adani Green Energy, Adani Wilmar, and Adani Total Gas, dropped 5% — the lowest tradable limit of the day.

With the Adani “scam” hot on the heels of most drawing room topics with different opinions clashing, some saying it would not affect the economy, others stating this was an attack on India, others declaring firmly the economy is going to crash. The Adani Group’s market losses balloon to around $65 billion despite its attempts to assuage investors.  The follow-on public offer of Adani Enterprises closes, oversubscribed 1.12 times.

Amid a row over alleged malpractices in the Adani Group of companies, as cited in the Hindenburg report, Finance Minister Nirmala Sitharaman said markets regulator Sebi should be given time to understand what happened.

“I think Sebi should be given time to come up clearly on understanding how this happened & what has actually happened… I think it is now time for them to get a comprehensive picture and I am sure they would do it,” Sitharaman said in an interview to ET NOW.

How Adani’s fall can smash hopes for India

Prices of goods will hike

Recently, when the price of milk went up by three rupees, economically minded Indians took to analyzing that Gautam Adani’s market crash will put pressure on the common citizens by raising taxes and prices of goods.

Destabilizing the country

In all this, leaders are questioning Prime Minister Narendra Modi’s silence. Amid the ongoing controversy over the Adani row, Aam Aadmi Party leader and Rajya Sabha MP Sanjay Singh launched an attack on Prime Minister Narendra Modi and alleged that the world’s biggest scam took place under the rule of the world’s biggest leader. “We are demanding a JPC probe into the Adani-Modi mega scam. AAM, BRS, and all opposition parties are demanding this. Overvaluing your shares and then lending from banks is a fraud in India. People are worried, they want answers. World’s biggest scam took place under the rule of the world’s biggest leader, and still, the Prime Minister is silent,” said Sanjay Singh.

When extra power is given to one source and it falls, it ruins the rest of the markets and this destabilizes the nation, not only economically but also politically.

Congress MP Rahul Gandhi claimed on Wednesday that Prime Minister Narendra Modi was protecting industrialist Gautam Adani by not ordering an inquiry into allegations of stock manipulation and accounting fraud made by United States-based investment firm Hindenburg Research.

Adani’s Fall can affect common citizens of India

 The common people of India will lose all their money and promised profits from the Adani Group.  Fitch said that the Adani group incident can damage India’s medium-term economic growth as the negative spillover of the crisis at the metal-to-mining conglomerate could make borrowings costlier for broader Indian corporates, though such risks are low.

Voices of people in the country are angry and expressing “We are made to pay for them, the difference is, a loan defaulted by Adani or any Crony friend of Modi, will increase OUR fuel price.”  We all know with the increase of fuel, prices will explode over the country on every other commodity in India, spiking inflation, which is already on the rise.  The price of milk increased by Rs. 3.  A citizen expressed, “A loan defaulted by you will see your home put up for auction. In all loan defaults, the payer is you and me.”

Adani group’s ten stocks have lost around $120 billion

It is no small matter when Bloomberg announced that till now, the group’s ten stocks have lost around $120 billion, or more than half of their combined value. On February 1, Adani Enterprises called off a fully subscribed, $2.5 billion Follow-on Public Offer (FPO).

Headquartered in Ahmedabad, the powerful firm, according to its website, aims to build ‘stellar infrastructure assets and contribute to nation-building.’ Its vision is to ‘become a world-class leader in businesses that enrich lives and contribute to nations in building infrastructure through sustainable value creation. At the Bombay Stock Exchange (BSE) on Friday, the stock of Adani Enterprises tumbled 20% to ₹1,173.55, a 12-month low, PTI reported.  A lot of dreams will be smashed in this fall.

Trading was suspended several times

Trading in the Adani firm was suspended several times; multiple instances of fall in its shares triggered these blockages.

 Others are losing faith in Adani Groups

When the National Stock Exchange (NSE) put Adani Enterprises and another group company, Adani Ports, under a surveillance mechanism that will need a 100% margin to trade in their shares.  The faith in the Adani group is lost globally and investments will fall through, incurring massive losses.

On February 7, Adani Enterprises will not feature on the S&P Dow Jones Indices, the latter announced on Thursday.

On Thursday morning, in a rare video message, Gautam Adani addressed investors on the withdrawal of the FPO, saying the board ‘strongly felt it wouldn’t be morally correct to move forward with the offer.’ He, however, assured them that the decision will not impact the existing operations and future plans.

“There will be more volatility in India this year; hence the market is prone to a correction,” Bernstein analyst Venugopal Garre wrote in a Monday note as Adani shares continued to tumble.

The Reserve Bank of India said, “the banking sector remains resilient and stable,” citing its own assessment of the current situation.

The Bloomberg Billionaires Index showed founder and chairman Gautam Adani’s net worth further on Friday, as his net worth fell by more than 51.1%, or $61.6 billion, year-to-date. Shares of most Adani Group companies fell further on Monday, continuing to drop as a feud between the conglomerate and short-seller firm Hindenburg deepened.

Adani Enterprises lost 4%, and Adani Transmission fell 10% in Mumbai’s morning session. Adani Green Energy, Adani Power, and Adani Total Gas fell 5% each. Adani Port and Special Economic Zone bucked the trend and traded 2% higher, but they remained volatile.

Bernstein warned there will be more pain ahead in its latest “India Strategy” report.  “There will be more volatility in India this year; hence the market is prone to a correction,” analyst Venugopal Garre wrote in a Monday note. “The best way to pick up such transactions is to look for arbitrages in implied growth.”

LIC lost over USD 100 billion in value

LIC has made an investment of Rs 35,000 crore in the Adani shares. As per LIC’s official statement, its value of it even today is Rs 56,000 crores. So, they claim there is no loss notionally. There is no profit also notionally.

However, fraud allegation has triggered a rout in Adani group company stocks. The rout has also threatened the value of investments made by the Life Insurance Corporation (LIC) and public sector banks. Adani group stocks, where LIC is heavily invested, have lost over USD 100 billion in value since a small New York short seller came out with a  report alleging financial and accounting fraud by the ports-to-energy conglomerate.

LIC has a major impact on middle-class savings

The Opposition says the Adani Group’s exposure to public sector banks like the SBI and LIC has a huge impact on middle-class savings.  The State Bank of India accordingly has received loans up to $2.6 billion to companies in the Adani conglomerate from the largest financier, or about half of what is allowed under rules.

It is revealed that the SBI’s exposure includes $200 million from its overseas units. Dinesh Kumar Khara, chairman of SBI, said earlier that the badly-hit Adani Group companies who were servicing the loans may not experience an immediate challenge” to whatever the bank has lent so far.

While the tremendous downfall of Adani’s share is causing panic, Union Finance Minister Nirmala Sitharaman does not see it as a season to panic seeing it as well within the permissible limits as stated by these lenders.

 Adani crisis can smash faith in the rest of the Indian stock market as at their peak

A New York Times article stated that the crisis could break confidence in the rest of the Indian stock market as at their peak, Adani shares accounted for more than 6% of India’s two main exchanges; today, the figure is barely 3%. “More troublingly, Adani’s fall could jeopardize the idea of India as the world’s next great hope as a driver of global economic growth,” it said.

India’s top banker Uday Kotak said, “…..large Indian corporates rely more on global sources for debt and equity finance. This creates challenges and vulnerabilities. Time to further strengthen Indian underwriting and capacity building,” he said in a recent tweet.

Though the upheaval in the value of shares of the Gautam Adani group due to allegations by a US-based investment research firm will not have any impact on India’s economy, Union Minister Gajendra Singh Shekhawat said on Sunday.

“I feel the share (value) of a private company would hardly have anything (impact) to do with the economy of the country. I think it is a normal process. The company’s shares had witnessed ups and downs in the past,” the Union Jal Shakti minister told reporters after being queried about developments connected to the billionaire businessman’s conglomerate

The brutal selloff has also hit India’s weighting in MSCI’s emerging-market benchmark

The brutal selloff has also hit India’s weighting in MSCI’s emerging-market benchmark, giving away its second spot to Taiwan after a rally in the latter’s market. As of the end of January, Taiwan’s weighting in the MSCI Emerging Markets Index rose to 14.2%, behind leader China’s 31.2%, while India’s fell to the third spot with 13%, according to Bloomberg-compiled data. India captured the second spot from Taiwan in August, however, the MSCI India Index has lost 4.2% this year, as per data by Bloomberg.

Adani group’s dominance in India’s clean energy industries could start a slowdown

Adani group’s dominance in India’s clean energy industries could start a slowdown in the pace of investment amid the country’s ambitious plan to reduce emissions, as per experts. Hindenburg Research’s allegations about companies linked to Adani Group have raised doubt on the firm’s future, including its massive green energy investment, possibly creating problems for Adani Green, the group’s renewable energy arm. Adani Group has pledged $70 billion investment in green energy infrastructure.

Voices of criticism

Kapil Vaidya @KapilVaidya21 Jan 29

I cannot fathom the conversation I just had with a relative😖

The guy lost 2 Cr. In the #Adani fiasco

He was carrying 67 lots in total & couldn’t square off on Friday

when the fall started he completely froze. 😵

#Hindenburg

I cannot fathom the conversation I just had with a relative😖

The guy lost 2 Cr. In the #Adani fiasco

He was carrying 67 lots in total & couldn’t square off on Friday

when the fall started he completely froze. 😵 #Hindenburg pic.twitter.com/KxjwjSg4vr

— Kapil Vaidya (@KapilVaidya21) January 29, 2023

Raza Khan @Raza_AKhan

Feb 5

List of 28 fugitives who allegedly looted India of Rs.10,00,000 crores.

– 27 are from Gujarat

– None of them is Muslim / Sikh

– and now #Adani

Who’s responsible? Adani Ke Chowkidar

#AdaniFiles #AdaniScam2023

List of 28 fugitives who allegedly looted India of Rs.10,00,000 crores.
– 27 are from Gujarat
– None of them is Muslim / Sikh
– and now #Adani

Who’s responsible? Adani Ke Chowkidar#AdaniFiles #AdaniScam2023 pic.twitter.com/hgVi7rZ4uA

— Raza Khan (@Raza_AKhan) February 5, 2023

Dr. Shama Mohamed:  Adani prepays $1.1 billion in loans to try to curb stock price fall.

If #Adani had the funds, why take loans in the first place? Which banks are being paid back? Why hasn’t the govt intervened to ensure that outstanding loans from Public sector banks are paid back first?

Inclusive Minds

@INClusive_Minds said:  Crores of public money were pumped into Adani’s businesses via LIC and public sector banks. Why?:

Crores of public money pumped into Adani's businesses via LIC and public sector banks. Why?: @RahulGandhi in Parliament#RahulGandhiRoars #AdaniScam2023 pic.twitter.com/xbCp3fRKdR

— Inclusive Minds (@INClusive_Minds) February 7, 2023

Adani Group companies, including the flagship Adani Enterprises, have been bleeding in the stock market, ever since allegations surfaced against group founder-chairman Gautam Adani and his conglomerate, for pulling off the ‘largest corporate fraud in history.’

Adani Enterprises Ltd

As common people’s money is involved here

Rahul Gandhi ji has asked 4 simple Qs

1:In how many trips #Adani went with PM

2:or joined later

3:or immediately went after PM visits

4:&got contracts immediately after PM’s visits

Rahul Ji – How’s the Josh?

Congress- High Sir 🔥🔥#Adani#ModiJPCseDaroMathttps://t.co/K13sF4HoxY pic.twitter.com/zg4ucLWbAZ

— Mohammad Waseem मोहम्मद वसीम محمد وسيم (@MohdWaseemINC) February 7, 2023

Prominent journalist Nikhil Wagle @waglenikhil said, “I am not surprised Rahul Gandhi’s speech is not the top story in @IndiaToday’s prime time show.  What else can you expect from Godi Media?

Lok Sabha Speaker has expunged almost all references to #Adani and his relationship to Modi made by Rahul Gandhi. Parliamentary records will have none of those allegations, including investment by shell companies. Will PM be allowed to make allegations against Congress today?”

Rahul Gandhi had also said in the Lok Sabha:  “Adani was at no. 609 in the top 10 rich of the world list in 2014, how did he reach at no. 2 in just a few years?  Adani has been grabbing all the defence contracts. Why?”

Managing Director of Kairali TV John Brittas @JohnBrittas said:  For the 1st time in history, patriotism was used as a shield to protect black money!#Hindenburg revelation isn’t new, even Panama papers named an #Adani associate.BJP came to power promising to eradicate black money.  Stashed away cash has doubled now! Time to give 30lakhs to every Indian

By not suing #Hindenburg, #Adani has accepted that #HindenburgResearchreport is factual.

By not ordering an investigation into the allegations in the report, Modi has accepted that he is in it with #AdaniEnterprise

The harder the fall, the tougher it is to get back.  At the end of the road, it could be the death of many hopes for the Modi government as their aspirations seem glued to the Adani group due to the many sell-offs Adani got from the governmental public sector.