By Venkatesh Raghavan
Mumbai: The international ramifications of the Adani Group companies losing out on the capital market since the Hindenburg Research report’s claim that the Group was engaged in stock manipulation and accounting fraud, got accentuated with the S&P Dow Jones Indices slated to remove the group’s flagship corporate, Adani Enterprises from their sustainability indices with effect from February 7, 2023.
The rating agency cited the serious nature of allegations from the media and stakeholder analysis that include fraudulent accounts and manipulation of the Adani stock prices. The collateral of such a move has serious implications as it might adversely affect and jeopardize the Indian capital markets, rendering their credibility low on the global scale.
As of now rating agency Fitch has kept its fingers crossed, and is monitoring for any adverse government reaction or decline in the group’s fundraising abilities besides a continuing slide in the group’s share pricing in the capital markets.
In New Delhi, owing to incessant disruptions by the Opposition Parties over the Adani issue, both Houses of Parliament were adjourned shortly after commencing at 11 a.m. today till Monday, February 6, 2023. The Opposition Parties today also conducted their protest at the Gandhi statue inside Parliament.
Finance Minister Nirmala Sitharaman today sought to reassure investors that India’s financial markets were well-regulated and there was no threat being posed to the country’s banking sector. The exposure of big lenders State Bank of India (SBI) and Life Insurance Corporation (LIC) of India to the Adani Group were within permissible limits she claimed, citing that she had interacted personally with their Chairman and Managing Directors.
The SBI today said its overall exposure to the Adani Group was at 0.88 per cent of the book or around Rs 27,000 crore.
The LIC stated that its exposure in the Adani group, as on date, was 0.975% of LIC’s Total Assets under management (AUM) at book value. LIC’s total holding under equity and debt is Rs. 35,917.31 crores as on December 31, 2022, under the Adani group of companies. The total purchase value of equity under all the Adani group companies was Rs. 30,127 crores and the market value for the same as at the close of market hours on January 27, 2023, was Rs.56,142 crores. The LIC’s total amount invested under Adani Group amounts to Rs. 36,474.78 crores as on date. The LIC stated that the credit rating of all of the Adani debt securities held by LIC is AA and above which is in compliance with the Insurance Regulatory and Development Authority of India (IRDAI) investment regulations as applicable to all Life Insurance companies.
The Reserve Bank of India issued a statement today claiming as per its current assessment, “the banking sector remains resilient and stable”. Referring to media reports expressing concern about the exposures of Indian banks to Gautam Adani’s business conglomerate, the RBI claimed various parameters relating to capital adequacy, asset quality, liquidity, provision coverage and profitability were “healthy”. It said banks were also in compliance with the Large Exposure Framework (LEF) guidelines issued by the RBI.
As the regulator and supervisor, the RBI maintains a constant vigil on the banking sector and on individual banks with a view to maintaining financial stability. The RBI has a Central Repository of Information on Large Credits (CRILC) database system where the banks report their exposure of Rs 5 crore and above which is used for monitoring purposes.
The RBI stated that it “remains vigilant and continues to monitor the stability of the Indian banking sector”.
With global pressure on ethical sources and the usage of green technologies, market watchers say the Adani Group is likely to suffer a loss of investors who insist on sustainability considerations in their portfolios. This has also mounted pressure on the government to function proactively to ensure that the Indian capital market is not subject to loss of credibility. On the group companies front, the Adani stock prices rose today afternoon subsequent to a 20% slump in the morning hours.
Three-time Congress MP and chairman of the Parliamentary standing committee on Information, Shashi Tharoor today called for a united opposition front to discuss the Adani debacle that now threatens to eat into the pockets of millions of investors from the stock market. He described the Adani crash as a very important issue. On par with China border skirmishes, price rise and job losses, this needs to be redressed urgently, he added.
It may be recalled that senior Congress leader Jairam Ramesh had asked for the banking regulator RBI and market regulator SEBI to jointly conduct a probe into the debacle precipitated by the market crash in Adani shares. Referring to the demand, Trinamool Congress MP Mahua Moitra tweeted “I have great respect for ace lawyer Cyril Shroff. But his daughter is married to Gautam Adani’s son. Shroff serves on SEBI’s Committee on Corporate Governance and Insider Trading. If at all SEBI India is examining the Adani issue, Shroff should recuse himself.”
In a related development, the country’s Apex court was approached to obtain relief for the investors who had lost heavily owing to short sellers. A senior advocate ML Sharma filed a Public Interest Litigation (PIL) against American short seller firm Hindenburg Research’s Nathan Anderson for unfairly exploiting innocent investors by effecting an artificial crash in the Adani Group companies’ share prices. ML Sharma also sought compensation for the investors who lost money during the share price crash, stating, “It was in the interests of obtaining justice for the aggrieved.”
The aggregate loss to the Adani stock empire stood at USD 108 billion, with the Group companies’ share and bond values falling further.
*Senior journalist
