The meltdown of Adani Enterprises Ltd has caused much shock in the marketplace. Rumour-mongering tongues were wagging for quite some time whispering aloud the overexposure/dangerous leveraging etc. by this trailblazing group to enhance the market capital and valuation, but none had expected the meteoric rise to turn into an equally stunning fall. To be honest, we must choose our words carefully.
It would be unwise and certainly premature to write the epitaph of a conglomerate led by the man who was ranked, not very long ago, as the second-richest in the world and had reached within striking distance of toppling the number one from his perch. It had taken Gautam Adani, a school dropout, just two decades to rise to the top from humble beginnings. The entrepreneur extraordinaire may yet have a trick or two up his sleeve to bounce back, constraining us to concede in future that this is no more than a hiccup.
The question that can’t be wished away at present is what caused the nationally embarrassing hiccup? Spokespersons for the industrialist lost no time in equating Adani with India. The report by Hindenburg Research, we were told, is an attack on India.
The short-trading firm masquerading as a research group, it is suggested, is only the tip of the iceberg—a massive western conspiracy to derail India’s ‘Growth Story’. Former Solicitor General of India, Harish Salve, once highly regarded for his legal luminescence, in an exclusive interview, hastened to pronounce his judgement in this case: No one likes India emerging to take its rightful place in the sun.
Successful Indians are targeted to tarnish their reputation and deprive them of investment opportunities, funds, etc. He repeatedly used the word ‘nonsense’ to dismiss allegations against the Adani group and rightly made the point that it takes years to build a reputation that can be destroyed in a blink by those who just have to throw some ink. All this may indeed be true but then raises more questions.
Is the reputation of a mighty diversified industrial empire spread across continents like a house of cards that collapses at the lightest touch or gentle breeze?
This reminds us of the story of three loveable piglets and the big bad wolf who kept threatening them, “I will huff and puff and bring your house down!” The youngest piglet had wrought his house in stone and this proved to be the nemesis of the villainous wolf. Equating India with Adani and uncovering conspiracies exhorting patriotic Indians to rally around has clearly misfired. Hindenburg in its rejoinder to Adani’s response rubbed salt into the wound by underlining that the Tricolour could not provide impregnable armour in this case.
Adani’s proximity to the government-in-power is not hidden from anyone. He has accompanied the Prime Minister on foreign tours and struck high-value deals. The niche the group has carved out for itself in gigantic infrastructure development projects is amazing. Ports and airports, energy and cement, you look around and you see how dominating is its presence. But this time the government has been quick to distance itself from the unravelling of individual fortunes.
The finance minister reassured the nation that Indian banks are resilient and the exposure of public sector banks is well within permissible limits, the regulatory authorities would do their job, and that the fundamentals of the Indian economy remain strong; this affair would not dent investor confidence in India.
She added for good measure that Follow-on Public Offers (FPOs) come and go and Foreign Institutional Investors (FIIs) keep shifting their funds across borders. She pointed out that India’s forex reserve has grown by $8 billion during this tumultuous week and there is no cause to lose sleep. One can’t but help to sympathise deeply with the finance minister. Her post-budget party was pooped good and proper by the Adani fiasco.
One must move on, but it can’t be business as usual. From Credit Suisse to Citibank and major ranking agencies’ their lack of confidence in Adani stock was clearly discernible. It will need more than slick media management and corporate communications to damage control. It would be some time before the momentum generated by the Prime Minister regarding the G20 summit can be regained.
With the majority the ruling party enjoys in Parliament, the Opposition’s demand for a Joint Parliamentary Committee will, in all likelihood, peter out. Doubtless, there would be other distractions from rising tension on the borders to the ongoing tug-of war-between the judiciary and legislature. Then there will be elections.
While all this goes on, those who have hitched their wagon to the Adani star will wait for the phoenix to rise again. The rest of us will keep pondering whether it was untamed ambition that brought Icarus down or some envious conspirator. Was it a heroic man spreading artificial wings who plunged after soaring or a hot air balloon that couldn’t survive a mischief monger’s pinprick?
Pushpesh Pant
Former professor, Jawaharlal Nehru University
pushpeshpant@gmail.com