India's Adani slammed by $45B stock rout | Hacker News Reader

India's Adani slammed by $45B stock rout

reuters.com

53 pointsSeanAnderson18 comments

A couple of days ago Hindenberg broke a story indicating they felt Adani was engaging in significant fraudulent activity, https://news.ycombinator.com/item?id=34513802

The market appears to be agreeing with their analysis. In the past day Adani is down nearly 20% against a >3T market cap.

It will be very interesting to see how this affects overall confidence in India's markets going forward.

Interesting that the top comment of the thread you posted attempts to minimize Adani's culpability.

It reminds me when the FTX story broke Coindesk and was posted to HN. The top commenter there was trying to convince everyone there's nothing to see and the concerns were overly dramatic.

I wouldn't call that minimizing. That's just how the nexus between politics and industry works in India. The kind of business practices Adani did is very common in India, and they 100% will get bailed out by the LIC or other PSUs, if not for bhaichara but for the fact that the optics of "Firangi" bankers attacking a Desi company and "insulting" Indian economic sovereignty are bad. Throw in some references to the East India Company, the Brits, and American sanctions against India in the 70s and 90s and that makes it easy to spin this story into one of economic nationalism. Welcome to the developing world.

edit:

Also, this sadly is not the first nor the last instance of this nexus arising in Indian politics. Not to minimize the Adani scandal, but you a similar issue arise in the Manmohan Singh govt (the rise and fall of DLF), the Vajpayee govt (IAI/Rafale's Barak Scandal), and so on and so on.

That said, usually, when news like this comes up in India, it tends to herald the looming end of a political era.

This is something I see so often it boggles the mind. Wealthy, powerful people tend to have fans. Any time there's an accusation against them, there's a bastion of common people who come to their defense, despite being potentially affected by the accusations. If anything, the common man should be putting wealthy, powerful people under even bigger scanner and scrutinising their every move, because one bad move can have large implications for them.

I had a tiny investment in ADANIENT stock that I sold the moment I read about the Hindenburg report. So, I contributed to the $45B!

The thing is Indian business environment is a big of a quagmire. It significantly helps that the legal system is wildly inefficient (and prone to influence by the powerful). Just look at the famous scandals and the frauds that got away with it…

The thing is the market regulator is still holding the cards. If any of these allegations are proven true, the key question would be whether the regulator failed at their job or worse colluded to let it happen. If so, it’s be a disaster for the Indian stock market. If not, I suppose frauds being frauds I guess.

i do legal compliance/litigation for indian businesses. there are a couple of things at play here (talking about small business)

1. taxes and compliance is VERY VERY HARSH because the govt expects people to fuck them over taxes.

2. people DO fuck the govt over taxes. there is a normal parallel cash economy that saves a tonne of indirect taxes at the start and direct income tax at the end of the financial year.

3. businesses have this concept of "why should we pay for compliance/ books and have that work as evidence against us if things go south when we can just bribe the investigating officer and our job will be done.\

4. for the most part, "paper" is king. online works for most part but because of technical inefficiencies, paper is allowed and that makes bribery a viable solution.

5. i know of a guy in delhi-ncr who apparently advertises that he "has contacts with all the GST departments of the area and if you have any problem with the department and you need settlement, you call me. ". He recently bragged to one of his teachers about earning "1 lac a day doing this broker job".

6. there is never ending cycle of businesses finding ways to steal tax money, govt finding out and plugging them and the cycle starts again. this has the unintended consequence of a genuine business owner sees no "value" in being genuine when it actually saves them cash.

7. we do audits but i know what kind of stuff we check so being an auditor, i do not "trust" an audit report of another auditor so you can say that about the profession. ( this applies to big and small businesses the same)

8. every party is greedy and the other party knows and tries to fuck one another. that is the gist of it.

9. "meteoric rise" is absolute bullshit.

10. people "hope" that people like adani are better because they have a tonne of money so they should be better than us so we should fuck with out customers/suppliers/employees/govt because that is the only way to become like that guy.

11. everyone has known that adani is being helped by modi govt, same for reliance but no one sees that as a risk.

12. you join BJP, "all your sins will be washed away". i have seen that in a lot of places on the streets.

i don't know... i am ranting

> 11. everyone has known that adani is being helped by modi govt, same for reliance but no one sees that as a risk.

I believe Reliance is not on the good side of the govt anymore. Their sheer size means they both still play nice, but they aren't a preferred client.

For reference, 1lac (lakh) is a little over $1200 USD

"If any of these allegations are proven true" - most of them are not allegations, they have quoted facts which are publicly verifyable. Other points are just massive red flags or questions. Examples -

- Rajesh Adani, was accused by the Directorate of Revenue Intelligence (DRI) of playing a central role in a diamond trading import/export scheme around 2004-2005. He was subsequently arrested twice over allegations of customs tax evasion, forging import documentation and illegal coal imports. Given his history, why was he subsequently promoted to serve as Managing Director at the Adani Group?

- The independent auditor for Adani Enterprises and Adani Gas is a tiny firm called Shah Dhandharia. Historical archives of its website show that it had only 4 partners and 11 employees.

- Offshore entities hold concentrated positions in Adani stocks, they accounted for up to 30%-47% of the yearly delivery volume in Adani stocks, a massive irregularity.

- Publicly listed companies in India are subject to rules that require all promoter holdings (known as insider holdings in the U.S.) to be disclosed. Rules also require that listed companies have at least 25% of the float held by non-promoters in order to mitigate manipulation and insider trading. 4 of Adani’s listed companies are on the brink of the delisting threshold due to high promoter ownership.

- Elara, a firm with almost $3 billion in concentrated holdings of Adani shares, including a fund that is 99% concentrated in shares of Adani. Leaked emails show that the CEO of Elara had dealings with notorious stock manipulator Dharmesh Doshi, partner of Ketan Parekh, even after Doshi became a fugitive for his alleged manipulation activity. How does Adani respond to this relationship, given that Elara is one of the largest “public” holders of shares of Adani?

So, I have no context here at all. But I see you’re asking why Rajesh Adani was made a managing director of the Adani Group. So dumb question… is the name not a coincidence and the explanation obvious?

Why the downvotes to this guy. He is right. Rajesh Adani is Gautham Adani's brother. That entire conglomerate is the poster child of post-liberalization goondagiri, but that was kind of the norm in Gujarat politics in the 90s. Each state in India has a couple Adanis, like the Ansals in Delhi NCR or the Badals in Punjab. They're one of the various thekedars (infra contractors) that just happened to get lucky that their baap fast tracked from Ahmedabad local politics to PM.

The facts are almost certainly true. The only question is whether the Adani's business losses can be compensated by the government's inevitable effort to make the Adani businesses whole and even richer.

The Adani group is little more than a funnel to the Indian political class in power right now.

To be completely fair, this may even be a better corruption model than that followed by previous governments since the fact that they are listed means they actually do make efforts to deliver something which leads to some money being used productively, whereas earlier corruption models involving paying government officials off directly often resulted in none of that money being used productively.

For the BJP politicians from Gujarat. Adityanath is beholden to industrialists in UP, Sarma is beholden to industrialists in Guwahati, etc. The moment Amit Shah and Narendra Modi leave national BJP politics, the Adani's political clout is numbered. The fact that everyone has been talking about them highlights how shitty they are at public perception management and government management. They're just Gujarati speaking Khaitans or Badals.

Pretty well played by Hindenberg.

This rout directly benefits their short position.

Invest 2 year to create enough mayhem in market, to cash your chips. Not bad for a business model.

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