Bursting of Adani Bubble Due to Hindenburg Impact; Can Modi Govt Absolve of Its Responsibility?
PJ James
While these lines are being written, Adani group had already lost around more than $50 billion (more than Rs. 4 lakh crore), equaling almost 20 percent of its market value (‘aggregate market capitalization’) since January 24, following the release of the “credible and well-researched” report of Hindenburg Research alleging “brazen stock manipulation and accounting fraud scheme over course of decades” by it, India’s biggest crony capitalist. Hindenburg has only focused on what is called “sky-high valuations” or manipulations in equities and unmanageable debt levels that had galloped the share prices of 7 listed Adani companies by more than 85 percent of their ‘stock value’.
But more serious for India is the underlying ‘bank exposures’ connected with this alleged ‘fraud’ by Adani. According to the Hong Kong based investment group CLSA (Credit Lyonnais Securities Asia), of the more than Rs. 2 lakh crore ‘debt’ (based on the estimate of financial year ending March 2022) of Adani, 40 percent is from Indian public sector banks and financial institutions including LIC and SBI. LIC alone had invested Rs. 77000 crore in the inflated shares of Adani of which Rs. 23500 crore had already been lost within two days! State-owned banks have lent twice as much to the Adani Group as private banks, with almost half of the lending by SBI alone based on mere ‘goodwill’ on account of Adani’s closest nexus with the Indian regime. Obviously, the hard-earned savings of millions of Indians are at risk.
Under the corporate-saffron regime of Modi who came to power on an anti-corruption plank, Adani transformed himself into an epitome of crony capitalism, sky-rocketing his wealth to hitherto unknown levels in global corporate history. Amidst Modi’s sermons against black money leading to the arbitrary superimposition of Demonetization, the biggest-ever “corporate-onslaught” on the Indian people, Adani had unfettered economic and financial avenues of plundering public wealth and bank-money with impunity, the details of which are already there in public domain. In spite of Modi’s poll-eve rhetoric on repatriating huge deposits stashed away in foreign banks by wealthy Indians, Adani could easily carry forward the use of foreign tax-havens. Thus, as reported, Adani group’s net profit for the second quarter ending September 30, 2022 doubled to Rs. 900 crore, while its total income nearly tripled to Rs. 79500 crore.
Of course, the political basis of Adani bubble, whose essence being financial speculation and stock jobbing together with the gobbling up of public wealth and bank money, was his close proximity to state power over the two decades of this century. In 2001, Adani was a small fry compared with Ambani, the latter then being the biggest Indian corporate, whose wealth at that time was 500 times that of Adani. Since then, Adani’s transformation as India’s biggest corporate and as world’s third richest billionaire are inseparable from his identification with Modi. Being a college drop-out, starting his career by setting up a commodity trading business in the 1980s, it was the liberalisation-globalisation regime of the 1990s that enabled Adani to set up the Mudra port in 1995. In 2002, the total worth of the main holding company of Adani was just $70 million. But within a span of just a decade, Adani could gallop his wealth to $ 20000 million (a growth of 300 times), quite unprecedented in corporate history, according to Forbes!
Before Modi’s ascent as PM in 2014, he could be seen frequently flying in a private jet owned by Adani. And, under Modi’s prime ministership Adani travelled with him more than any other Indian corporate billionaire. He could be seen flying with Modi across the globe from the US to Australia or New York to Canberra covering all the continents. And Adani’s wealth multiplied several times in the process. The rest is known to all. The corollary of crony capitalist Adani’s meteoric rise as India’s number one and world’s third richest billionaire is the horrific levels of India’s worsening economic inequality and transformation of India as the ‘citadel of global poverty’ under the saffron-corporate fascist regime.
At the same time, according to the laws of motion of corporate capital today, there is nothing untoward in the bursting of Adani bubble. The ‘fictitious’ financial empire that is built up by Adani and of his kind under neoliberalism does not have any material basis in production. The market value of ‘financial capital’ or speculative asset accumulated by Adani is artificially inflated and driven up by manipulating supply and demand for making the highest profit within the shortest possible time. The inflated values of such assets can be easily punctured like balloons even by the slightest disturbance to its upward spiral, resulting in a crash. The sudden plummeting or collapse of Adani stocks following Hindenburg report is to be viewed in this inherent logic of corporate accumulation today. No doubt, as media reports indicate, the invention of new financial and stock market devices along with the granting of unfettered freedom and deregulation of corporate capital including possibilities of even ‘insider trading’ have made the situation beyond the control even by the corporate-saffron neofascist regime.
Obviously, Adani, India’s biggest crony capitalist, could easily balloon his financial corporate empire solely due to Modi regime’s far-right neoliberal policies such as liberal tax, labour and environmental regulations that enabled him to buy up precious national assets including land, natural and mineral resources, factories and stocks at throw-away prices while remaining mainly in the sphere of speculation. His unholy nexus with power made it easy for him to massively transfer thousands of crore worth of bank money to his flourishing corporate empire on the basis of mere ‘goodwill’. Now following the Hindenburg Research Report, all of a sudden and according to the inherent logic of corporatisation today, Adani’s assets are becoming “toxic” in the stock market, and are facing massive selloff.
Now while Adani is facing the severest crisis in his corporate history, as already noted, Indian banks and financial institutions whose assets Adani has used for his money-spinning businesses are subject to what is called maximum “market exposure” that call for urgent intervention on the part of the authorities for protecting the interests of customers and people. At the same time, people should be vigilant over any “rescue operation” on the part of Modi regime to bailout Adani by shifting the whole burden to the shoulders of tax-payers, bank-depositors and common people. Above all, the Modi regime cannot evade its responsibility regarding the circumstances that led to this ignominious development and hence it is bound to explain to the people on them based on proper procedures.
(This article first published at countercurrent.com portal)
