The Adani Group continues to dominate headlines even after nearly three months of the Hindenburg report hitting the wires. The issue has been kept boiling not just by the opposition but also by foreign media periodically adding fuel to the fire.
The company itself has been nonchalant and the government has doggedly refused to be dragged into the fracas. It has denied demands for appointment of a Joint Parliamentary Committee (JPC) probe, having acceded to a review by a Supreme Court-appointed expert committee. It has left the rest to the independent regulator, Securities and Exchange Board of India (SEBI), and the Reserve Bank of India (RBI) to deal on merit. Meanwhile, retail investors seem unfazed. As per reports, the total number of retail investors across Adani Group companies rose by 47.4% to 6.95 million by the end of March.
The timing and method of assault has given rise to several conspiracy theories ranging from corporate rivalry to the invisible foreign hand trying to spoil the “India (Growth) Story” with the ultimate objective of forcing a regime change. Though the latter apprehensions may be far-fetched or debatable, at least one opposition party—namely, the Congress—has found cannon fodder to mount a full-scale attack on the government, specifically targeting the prime minister. It is reminiscent of Rahul Gandhi’s “Chowkidar Chor Hai” campaign of 2018 alleging corruption in the Rafale deal. Even then the original trigger was a report in foreign media, and many saw it as a déjà vu of Rajiv Gandhi’s Bofors moment. The current attempt to link Adani with Narendra Modi has shades of the insinuations of association between the Gandhi family and the Italian businessman Ottavio Quattrocchi during the Bofors saga. The jury is out and it is not for us to jump to any conclusion. However, it does raise some questions that merit consideration.
There are essentially three main charges against Adani: First is that of market manipulation through round tripping of money via off-shore vehicles controlled by family entities. Secondly, leveraging the inflated valuation of stocks to raise further funding. Thirdly, being a beneficiary of crony capitalism. Let us take one at a time.
Round tripping as practice has existed from time immemorial and is not typical of India. Tax havens across the world thrive on the business of tax engineering. That, however, does not legitimise re-routing operations or make money laundering kosher. The task of tracing the origin of money rests with the central bank of a country. RBI has been doing a fine job of that and has earned the respect of the international financial community for its independence and professionalism.
Therefore, to tarnish the reputation of the premier financial institution with unsubstantiated charges has the potential to seriously damage national credibility and climate for foreign investments. Thus, a responsible political party should be cautious in hurling such accusations which could have long-term impact and come back to haunt it if it comes to power by ousting the current dispensation.
Valuation is often confused with earnings. It is no more than a temporal index of wealth based on the whims of the stock market, the ways of which are difficult to fathom. The acid test is the asset base and expected future earning streams.
In the case of the Adani Group, the bulk of its investments are in infrastructure assets such as ports, airports and power that are poised to grow exponentially as India moves up in the hierarchy of the global economic order. Its recent acquisition of the Holcim cement operations in India are also linked to the infrastructure sector. Another chunk of its businesses are in energy—both traditional and green. This probably explains the faith of the retail investors in the future prospects of the group.
Much is being made of Life Insurance Corporation (LIC) increasing its stake in Adani stocks, saying the money of ordinary citizens is being used to prop up a faltering crony capitalist. In fact, it can be conversely argued that by not buying Adani shares in the dip, LIC would be doing greater disservice to its shareholders.
Finally comes the ‘elephant in the room’—the sensitive question of ‘crony capitalism’. As Sharad Pawar pointed out, associating business houses with the government of the day is not new. Only the names keep changing. Post-Independence one used to hear of the Birlas, Tatas, Bajaj, Dalmias and a few other names. Reliance ruled the roost for several decades.
Though the Adani Group has been around for a long time, it is seen as the new kid on the block. Some may argue that it has emerged as a foil to Reliance in the Modi era. But the arguments are misplaced. The problem with crony capitalism arises when national interests are traded against favours. But mere facilitation of business cannot necessarily be construed as corruption. The country needs entrepreneurs with a risk appetite. Counterfactually speaking, without “swadeshi” businessmen like G D Birla, Jamnalal Bajaj and J R D Tata—a fledgling economy like India could not have taken strides in industrialisation. Our neighbour which got Independence at the same time is a study of contrast.
Now India needs a few enterprises of global scale. Not everyone has either the ambition, audacity and above all, the vision of an Adani or Ambani to take on the world. In global trade, lobbying is not a bad word. The Americans and Europeans have done it all along for their companies. Now the Japanese, Korean and Chinese are emulating them. If our prime minister is doing it for Indian businesses, he is discharging his duty as the chief executive of the country and not as a favour to Adani. To spite Modi, the opposition should not end up cutting the nation’s nose.
(Views are personal)
Sandip Ghose
Current affairs commentator
(sandipghose@hotmail.com)
(Tweets @SandipGhose)