The Adani Saga: Scandal, Conspiracy or a Non-story?

One can refer to the Adani-Hindenburg saga as a scandal, a scam, a non-story, a conspiracy against India or…some of that will depend on the perspective one has on this government and that is understandable. There are two other aspects to it that one cannot deny or will, at the very least, find hard to deny, based on the evidence before us. The first is the reaction of the markets and the second is how the Indian state has—or not—reacted.

Let us look at the first reaction: the reality is that those people who have real money at stake in this issue have voted, and they have voted in favour of Hindenburg’s allegations. Readers may not know that the exposure of India’s mutual funds to the Adani group was always limited, with almost nobody willing to invest in it. As the Hindenburg report puts it: ‘Despite Adani listed companies featuring in domestic and overseas indices, no active local fund owns Adani Green, Adani Enterprises, Adani Total Gas or Adani Transmission above one per cent of equity, according to shareholding disclosures.’

The question is why. Because it is truly puzzling. The second-richest man in the world is (or was) Indian, having written a rags-to-riches story rivalling that of the great Dhirubhai Ambani. Why did the men and women entrusted by ordinary Indians to invest their savings not put their money behind him? Second, his business is in infrastructure: ports, airports, energy, mining and so on. Meaning that he was doing ‘development’ in the way this government understands the term. There were and are real assets on the ground behind the business. This is not a business of diamonds or things that few understand. It is, or was assumed to be, a solid thing. Lastly, Mr Adani is famously close to our prime minister. It is in the latter’s reign that he has risen to the place he has. Whichever side of the fence one is on, it cannot be denied that the protection of a strong leader ensured that Adani’s businesses did not have to contend with the sort of harassment that has become routine for the rest of us. All in all there was nothing stopping the Adani group from conquest assuming that it did the job well.

Now let us look at the second facet of this conundrum—the reaction or non-reaction of the State. By ‘State’ I mean the collective: the government, its agencies, the judiciary, the regulatory system. The only significant action came not from any of these but from the market: the money bolted. The traders, punters and brokers, presumably many, if not most, from the same community as Mr. Adani (and me) and highly nationalistic as we know they can be, saw something in the Hindenburg report that the Enforcement Directorate, the CBI and other central bodies did not. (For a moment, let us assume they are really independent and not being ordered around by the PMO and Amit Shah).

If one is on the side of the government and Adani, or more specifically if one is on the side of the prime minister, one can say they did not act because there is nothing to see here. That the markets are overreacting or reacting wrongly, and that the report is what the Americans call a ‘nothingburger’. That is fine because it is an opinion. I can say something and you can say something else. The issue is whether the State and its agencies can do the same and the answer to that is: No. The full story reveals something about New India, which is troubling.

One of the defences the Adani group’s Indian flag-waving, Australian citizen CFO put forward was that all the allegations are old (“stale”, in his words). Which, in fact, is the most damning aspect of the Hindenburg report. If all these things have been in the public domain—and indeed they have been— and if the regulatory agencies were looking into them—as they were—why didn’t they red-flag them?

Hindenburg says that ‘offshore shells and funds tied to the Adani Group comprise many of the largest “public” (i.e., non-promoter) holders of Adani stock, an issue that would subject the Adani companies to delisting were Indian securities regulator SEBI’s (Securities and Exchange Board of India) rules enforced.’ Meaning that SEBI is not doing its job and the government is fine with it. Hindenburg adds: ‘Right to Information (RTI) requests we filed with SEBI confirm that the offshore funds are the subjects of an ongoing investigation, more than a year-anda-half after concerns were initially raised by media and members of parliament.’

Readers may be familiar with the Sherlock Holmes story about the “dog that didn’t bark”. It’s about the disappearance of an expensive racehorse and the murder of the trainer. Holmes, in his investigation, concludes that this was an inside job because nobody heard the watchdog, which was present, bark. In our mystery, the watchdog agencies are silent, but it is the market that has barked and has not stopped barking. Till such time as it continues to do so, this headache will not go away.

There are some things the government can wish away or use brute force to quell. Alas, this is not one of those things. And for this reason, the scandal, story, scam or nothingburger will remain with us, till it is addressed and fixed.