Vivid News 24: Over the past 30 years, major stock market frauds in India have taken advantage of weaknesses in the regional banking system. However, because of India’s increasing interconnectedness with the world economy and financial system, Mumbai may not be the location of the next major scandal’s planning; rather, it may be London or Singapore.
Or at least that seems to be what Hindenburg Research is implying in its research on Indian businessman Gautam Adani, whom it accuses of “performing the largest scam in corporate history.” It was abruptly dismissed when it was released in the US on Tuesday evening.
In response to the detailed claims of stock manipulation and accounting fraud made by the short-seller, Adani’s chief financial officer stated in a three-paragraph response that the timing of the publication “shows a brazen, mala fide intention” to damage the group’s reputation just as its flagship firm begins a significant $2.5 billion share sale. The lengthy statement also contains 88 questions for the fourth-richest individual in the world, none of which have been responded to.
Following a five-year, 2,500% surge in Adani Enterprises Ltd., the Center of an empire strongly aligned with Prime Minister Narendra Modi’s economic policy, investors appear to be at least a little wary, as evidenced by the $12 billion decline in Adani shares that followed the publishing of the report.
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Let the investors evaluate the results of the campaign against the conglomerate, which CreditSights, a division of Fitch Group, called “seriously overleveraged” in August. The infrastructure player is essential to everything from India’s ports, airports, and green hydrogen to coal and power.
There was a brief period of anxiety in June 2021 that subsided after being provoked by some of the same worries. Even then, other investors should consider the two-year probe by the short-seller. Because it raises numerous concerns over the integrity of the larger Indian market, which is hampered by the demands of both political nationalism and financial globalization.
If Hindenburg is correct, a network of shady actors has strategically positioned itself in the heart of these opposing forces and is exerting enormous influence over India’s markets from afar in coordination with corporate tycoons at home. In the meantime, soaring stock values in India have come to represent a strong sense of national pride.
And this is more of a concern for international investors than the charges about Adani stock: Are public markets in India reliable? The Securities and Exchange Board of India ensures complete isomorphic imitation, to use a phrase from development expert Lant Pritchett.
Regulated businesses check off many of the same boxes that they would in a mature market. A growing number of these rules, like in the West, are related to corporate governance. However, delve further into the disclosures, and unsavory figures emerge: “briefcase investors,” disguising as funds with a Mauritius domicile and accessible to any CEO seeking to generate some publicity for his stock.
The Indian regulator is occupied with pursuing technical benchmarks, such as outpacing the US in terms of the speed of the settlement cycle on the domestic market. However, efficiency is simply one aspect of asset exchange. Above all, it’s about trust and severe punishment for those who betray it, like in the cases of Enron Corporation and Bernie Madoff. Is SEBI holding off on intervening in the market till there is a public outcry?
The issue of family-controlled enterprises being close to political power is not exclusive to India and has existed for a long time. However, the development of jingoistic nationalism in recent years has given certain business executives’ actions a new sense of impunity.
When a yoga master can tell his followers at a public gathering that everyone investing in his edible-oil company will become wealthy, who needs a share prospectus? Being viewed as the representative of a proud, independent India is increasingly seen as a way to evade scrutiny from the press, regulators, or environmental organizations, all of which can be criticized for not supporting the chauvinistic chest-thumping.
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