The Adani Group, a conglomerate that builds and operates ports, power lines and food factories across India, started the year near the top in the world and has grown tenfold in value over the past two years. Its founder and CEO, Gautam Adani, was ranked the second richest person on the planet after Elon Musk last summer.
It then crashed even faster than the explosion. Blue chip investment firm Hindenburg Research released a report on Jan. 24, alleging that the company inflated its share price through financial gimmicks. The company had bet that Adani’s stock would crash, but the stock fell. By the end of February, Adani Group’s 10 publicly traded shares had lost two-thirds of their value, costing nearly $150 billion. This report convinced almost everyone to head for the exit.
But the Adani group held on. It is riding its biggest rally since the crash this week. The flagship Adani Enterprises is up 31% in four days. Another Imperial unit, the Adani Portes, fully recovered the losses. Some are bullish that the group as a whole could rise another 15-20% this year.
Many factors contributed to the survival of the Adani group over the past four months. India’s state-owned institutions had loyal investors, and bargain hunters came to buy stocks at bargain prices. Another reason: Adani had tangible assets for everyone to see, mostly infrastructure projects. Whatever their value, these businesses had value that many investors found attractive.
But the catalyst for this week’s outburst of optimism came indirectly from the Indian government.
On Friday, a committee convened by India’s Supreme Court following bombshell comments in January said India’s financial regulator is doing its best to oversee the Adani Group, but the chaotic ownership structure behind it. said it has not been able to penetrate Financing. Plus, they “pulled the blank” and probably never will.
This is frustrating for the government agencies involved in protecting India’s capital markets, and could deter many investors. But for investors who were sold to Adani Group, it was a welcome relief. The court asked the main regulator, known as the Securities and Exchange Commission of India, whether it could explain who owned the money that helped Adani’s share price grow tenfold from 2021 onwards. He requested that the work be completed by the 14th. He said the work could go on endlessly as a “journey without a destination”.
Adani Group did not respond to a request for comment. The institute called claims made by Hindenburg Research in January “unsubstantiated allegations based on fictitious fact patterns” and even “a calculated attack on India.”
Rajiv Jain of GQG Partners, Fla., one of the investors who bought a big chunk of Adani stock at its lowest price in March, said he bought more as the stock surged this week. bloomberg. Jain said his total stake in Adani companies is nearly $3.5 billion, citing the value of Adani’s infrastructure business as the reason for his investment.
Beyond infrastructure, one of Adani Group’s most valuable assets is the invisible. Gautam Adani and Indian Prime Minister Narendra Modi have worked together for decades. The two had risen together in their home state of Gujarat, with Modi flying to New Delhi on Adani’s private jet after Adani was elected leader of the national government.
Since the shadow of suspicion over his company, Adani has maintained a relatively low profile in India. He was busy abroad. He opened a new port in Haifa, Israel, where he posed with Modi’s friendly counterpart, Prime Minister Binyamin Netanyahu. And he traveled to Europe and the United States to assure investors that he was in a strong position. But Modi himself, who used to be everywhere, refuses to mention Adani in public.
The Supreme Court commission’s findings suggest that the Adani Group can now relax as far as Indian authorities are concerned. Without investigative powers, regulators cannot pursue the allegations raised by Hindenburg Research in January. Indian rebels are eyeing Adani’s ties to Modi and calling for the creation of a special parliamentary commission that could unearth more information. But there is little chance between the courts and Modi’s parliamentary majority.
The position of the Adani group in India’s political economy appears to have been strengthened, if not completely repaired. This is not just a stock market winner or loser, it’s an important development. Modi’s vision for India hinges on building massive infrastructure.
The country has already accelerated and improved a record number of projects during his nine-year tenure. Airports, highways and power transmission have all improved significantly and are better than other indicators economists say lagging behind, such as private investment. Most of the money comes from the government. But architecture also needs private partners.
New York-based Hindenburg Research alleged that the Adani conglomerate artificially inflated valuations to raise the funds it needed to cover its debts to foreign investors. Adani is taking steps to pay off its debt burden, but it could still attract scrutiny from foreign regulators.
But inside India, Adani’s critics may have to change plans. Opposition parties complain that the press and even the Indian parliament are being prevented from talking about Mr Adani and Mr Modi. Adani’s local competitors and partners alike should consider the fact that the company’s central position in Indian business remains secure.
