Adani row: India well governed, market well regulated, assures Nirmala Sitharaman

Two days after presenting the Union Budget, what the government called the first budget of Amrit Kaal, Finance Minister Nirmala Sitharaman.

In her first reaction to the free fall stocks of Adani Group’s companies, said the country’s market was “well regulated”. She said it was unexpected that the controversy around Gautam Adani’s business would affect investors’ confidence.

India remained “an absolutely well governed” country and a “very well-regulated financial market”, Sitharaman told a news channel.

“One instance, however much talked about globally, I would think is not going to be indicative of how well Indian financial markets have been governed,” said the finance minister.

She said the investor confidence that existed before shall continue even now.

Adani vs Hindenburg
The reason behind the massive dip in stocks of Adani Group companies is a scathing report published by US short seller Hindenburg Research, which accused the conglomerate of stock manipulation, improper use of tax havens and even money laundering.

Hindenburg, which disclosed that it has taken short positions in Adani Group stocks, also raised concerns about the conglomerate’s rising debt. While Adani Group cited extreme volatility in the market as the reason behind aborting the FPO of its flagship company, Hindenburg’s report seems to be the actual trigger.

Adani Group dismissed the US short seller’s report and even released a 413-page response, but the stocks of the conglomerate’s listed companies continue to plunge.

The decision to abort the secondary share sale has made matters worse, as most Adani Group stocks hit their lower circuit on Thursday. Adani Enterprises tanked the most at 26.70 per cent, closing at its lowest level since March 2022.

Adani Group faces increased scrutiny
The impact of the FPO withdrawal was not just limited to the markets, with opposition party politicians demanding a probe into the Adani Group. A Reuters report indicated that the Reserve Bank of India has also put the group on its watchlist.

As per the report, RBI has sought details from banks about their exposure to the Gautam Adani-owned conglomerate. Earlier, another report indicated that the Securities and Exchange Board of India (Sebi) had started examining the recent crash of Adani Group stocks, besides some issues highlighted in the Hindenburg report.

Brokerage firm CLSA estimates that Indian banks have an exposure of about 40 per cent of the Rs 2 lakh crore of Adani Group’s debt as of FY23. This has raised concerns among analysts about a wider potential impact on the Indian financial sector,

Meanwhile, Citigroup’s wealth unit has stopped extending margin loans to its clients against securities of Adani Group. The development comes a day after Credit Suisse’s lending arm assigned zero lending value to bonds issued by Adani Group companies.