A serious situation

31/01/2023

The Adani conglomerate, the business group most closely associated with Modi’s India, is under serious attack in the stock market, following a damning report by researchers at Hindenburg, the outfit that specialises in short-selling overhyped tech stocks. After the Hindenburg Research on January 24 was published, the Adani shares started plummeting, wiping off a sizable part of its $93 billion wealth. The Research Group has alleged that the Adani group has manipulated the stock market and indulged in financial fraud. The report l dwindled investors’ confidence and the Adani shares lost 20 percent in a week. This is a serious situation that could impact the country's economy as huge public money is riding on the Adani Group. Many banks that have lent money to the Adani group are already bearing the brunt. leadership. It is hard to exaggerate Adani’s pivotal significance to the story of India’s rise. Founded in the 1980s as a commodity trading group, Adani has become a conglomerate of both national and global significance. At the same time as driving national infrastructure development, Adani personifies the oligarchic linkages and rentier profits generated by licensing system for infrastructure on which Modi’s growth model has heavily relied.
How to make sense of this political economy is one of the critical questions in India today. And what will be revealed by this attack on Adani? There have been indications that not all was well with the growth of the Adani group. Its meteoric rise is one factor that raises eyebrows of the investors. Most of the companies listed by the Group are over valued, their shares selling several times their intrinsic value. If Adani Group is found to have manipulated the market then it would also mean that SEBI did not do its work properly or knew about it but did not act. That is fishy, to say the least. The Adani group has tried to debunk the report saying that the research group is all about short selling and it was contemplating legal action against it. However, Gautam Adani would do well to answer the 88 questions posed by the research group to dispel all misgivings about it. Moreover, it must clean up the 34 shell companies in Mauritius which only deal in Adani shares and are managed by Gautam Adani’s brother. The banks that generously lent money to the Adani groups are having their stocks in the red. State-owned banks have generously lent money to Adani group with 40 per cent of their lending being done by SBI, while LIC has exposure to the tune of Rs 36,000 crores which makes them vulnerable and puts the economy at risk. This is a serious situation and could snowball into a big national crisis. It could negatively impact the banking sector which is already under strain as its non-performing assets (NPA) have been rising steadily over the years.

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