Adani Group troubles spark protests in India as stock turmoil turns political

NEW DELHI — Hundreds of demonstrators from India’s main opposition party gathered on Monday in the Indian capital, New Delhi and other cities, demanding an investigation into allegations of fraud and stock price manipulation by India’s second-largest business group, led by coal mining tycoon Gautam Adani. .

Adani Group said on Monday that its main investors, known in India as “promoters”, have pledged to prepay $1.1 billion in equity-backed loans due by September 2024. The redemptions include stakes in Adani’s port business, Adani Green Energy and Adani. transmission of infection.

Shares in Adani Ports & Special Economic Zone jumped 9% after the announcement.

Members of the National Union of Students of India (NSUI) take part in a nationwide protest in New Delhi on February 6, 2023, calling for an investigation into allegations of major accounting fraud at Adani, the country's largest conglomerate.
Members of the National Union of Students of India at a protest in New Delhi on Monday.Sajjad Hussain/AFP – Getty Images

Members of the opposition Congress Party called on Prime Minister Narendra Modi to order an investigation into the Adani Group companies after US-based Hindenburg Research accused them of various fraudulent activities. Adani’s group denies any wrongdoing.

In New Delhi, congressional party workers tossed counterfeit banknotes into the air and chanted slogans. Some burned a suitcase with images of Modi and Adani. Some protesters climbed over the police barricades, were detained and taken away in police vans.

Opposition party workers in the financial capital of Mumbai and in the southern city of Chennai gathered outside the offices of the state bank and the country’s largest insurance company, which are known to invest in Adani stock.

So far, there are no signs that the scandal has spread through India’s financial sector, and the protests are more a reflection of political theater than spontaneous public outrage. On Monday, lawmakers interrupted parliamentary hearings for a third day as there were many calls for India’s market regulator to look into Hindenburg’s claims.

Adani and his companies lost tens of billions of dollars when investors dumped their shares. Adani Group canceled a $2.5 billion share offering last week, promising to return the funds to investors.

The billionaire’s fortune has increased by more than 2000% in recent years. Critics say he has benefited from a strong relationship with Modi and his government, while others point out that he has also flourished under previous administrations.

“What action, if any, has been taken to investigate the serious allegations made over the years against the Adani Group?” This was stated by the general secretary of the Congress party, Jairam Ramesh, in a statement released over the weekend. Do you have hope for a fair and impartial investigation? he said, referring to Modi.

Shares of Adani Enterprises, the group’s flagship, fluctuated on Monday and fell 2.1% by mid-day Monday. Its market value has shrunk by over 50% since the Hindenburg report. Shares of five other companies listed on Adani fell from 5% to 10%.

Adani’s decision to early repay the share-backed loan solved one of the key issues Hindenburg had raised: large loans using the group’s shares as collateral. Adani’s written statement said that the major shareholders’ pledge to repay this debt was “an extension of the promoter’s assurance of early repayment of all equity-backed funding.”

The wild fluctuations in share prices have highlighted concerns about corporate governance, especially as the country tries to attract foreign investors.

On Saturday, the Securities and Exchange Board of India (SEBI) released a rare statement meant to reassure investors.

“Over the past week, there has been an unusual movement in the price of shares of a business conglomerate,” the Indian market regulator said, without naming Adani Group. It states that there are mechanisms in place to deal with the volatility of certain stocks. The regulator said it would review any information before taking “appropriate action.”

Finance Minister Nirmala Sitharaman dismissed fears on Friday that the disagreement could alarm global investors, saying India’s financial markets are “very well regulated.”

The Hindenburg report says the company has bet against seven of Adani’s major publicly traded companies, believing they are “on an 85% loss on a purely fundamental basis due to a sky-high valuation.”

Adani made his fortune in trading and coal mining before going into construction, power generation, port and airport operations, defense equipment manufacturing, and running a media company.

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