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Can Gautam Adani survive the storm?

W.New York edition About $150 billion, or two-thirds, of the total value of Adani Group’s listed holdings was wiped out by short-seller reports in late January and early February. Will the Indian banks and insurers with exposure also wobble? Will the contagion spread to other parts of India’s financial world? And the Indian government will take a proactive stance against allegations of short seller fraud and stock market manipulation. Pursue meaningful investigations?

A month and a half later, the answer to the first two questions is, fortunately for India, no. The third answer is less clear and somewhat less constructive.The government does not appear to be in a hurry to resolve the issue.Hundreds of private investors are pressing Delhi to find out the truth as soon as possible. . Now that these big questions have been resolved, attention is focused on the next conundrum. Can the Adani Group and its eponymous founder, Gautam Adani, recover or fall apart, dragging out the Indian government’s grandiose plans for infrastructure and green energy investments?

Last month brought hope to Adani and those who support his enterprise. Adani runs some of India’s largest ports and airports, stores one-third of his grain, operates one-fifth of his power lines and produces a large amount of cement. . It is looking to clean hydrogen and steelmaking, among other ventures. The group’s total market value has risen from his lowest of $82 billion to his more than $110 billion. Shares of flagship publicly traded Adani Enterprises are up 54% from their low on February 27. Yields on bonds issued by some of his Adani companies have fallen from sluggish levels.

A major turning point in the fortunes of the Adani Group came in early March. GQGMore Partners, a US-based, Australian-listed and Indian-managed fund, has purchased stakes in several companies in the group directly from the Adani family for $1.9 billion. at the time, GQGMoreMy boss, Rajiv Jain, who lives in Florida, financial times “The market mispriced Adani,” he said, praising the conglomerate’s “very capable management team” and “excellent” execution.

Adani used the proceeds to pay off a $2.1 billion margin loan backed by shares of Adani companies, alleviating one source of financial stress. The rest of his $1.1 billion, half from the Adani family and half from the cash flow of the Adani business, was used to meet other short-term obligations. These moves reduced the Group’s outstanding debt by just 4% to $27 billion. But they eased the pressure and reassured the market. So did the acquisition conglomerate’s decision to pause new capital spending beyond what it had already committed and put large acquisitions on hold until September 2024.

Amid these demonstrations of financial discipline, Adani Group has embarked on a global glamor attack that is scheduled to end on March 17th in California. seems to be working. For example, Jain said: GQGMore‘s investment in the Adani business is “likely to increase depending on pricing and delivery methods”. I’m here. The company says recent news reports about the sale of just under 5% of his cement business are bogus. However, it has not ruled out the possibility of selling stakes in some divisions. Some of these, like the port business, are solid businesses that offer predictable returns if the Indian economy continues to grow at its recent pace of 7-9% per annum.

Once the Adani Group is on a more stable footing, another question will undoubtedly arise.How long can Mr. Adani keep his nation-building ambitions in check? won a bauxite mine at an auction. For the foreseeable future, the assets the company has always planned to bid on will be incorporated into Adani Enterprises’ mining subsidiary. But before the short-seller attacks, the tender for the mine was widely seen as part of a larger plan to get into aluminum smelting, steelmaking, and other heavy industries. It is unlikely that you will ever throw it away.

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https://www.economist.com/business/2023/03/16/can-gautam-adani-ride-out-the-storm Can Gautam Adani survive the storm?

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