Last week Hindenburg Research, a market research firm, a young, but single-minded company, that has scalped some of the financial world’s dubious firms over shady business practices, has now trained its sights on the vast and diverse Adani empire that has seemingly risen to unprecedented heights in double quick time. Hindenburg Research, which has made a living out of ‘shorting’ companies that it believes to be overvalued, has accused the Adani Group of pulling off “the largest con in corporate history”.
Big words from a small company punching way above its weight at one of the richest men, suspiciously so, in the world right now. But the nature of the researched report suggests that who is making the allegations is of little consequence and instead, what is being said deserves credence.
To that extent, the questions raised about the group’s corporate governance mechanisms and oversight hinted at the present Indian dispensation’s propensity to favour and overlook the company’s tendency to cook the books and hoodwink the authorities.
It is precisely because the allegations held water and remained largely unrebutted in any credible way that the stocks of the many listed companies tanked losing as much as 20% of their value over two days of trading towards the end of the week.
What happens on Monday remains to be seen, but it is entirely likely that the stock will stabilise or even rebound as the market gauges the risks the company faces in the light of the allegations.
So far, however, the company has reacted to the report with bluster, questioning the timing, motivations and alleging a conspiracy, but has failed to respond meaningfully to the questions that have been raised. That brings into focus the role played by India’s regulators, who appear to be wholly incapable or unwilling to really scrutinize the dealings of the biggest players in the Indian markets.
Unlike the west, companies (as well as political parties) in India and much of Asia tend to be family-run affairs that have relied on friendly governments to have their way. But even to companies such as Adani the chickens have ultimately come home to roost, either when the government changed or when the government is forced to change its lenient attitude towards a company either because of mounting public pressure or because the company risks taking much larger institutions down with it. This, the sceptics say, will not happen anytime soon in the case of Adani.
This brings into focus the nature of India’s corporate governance and willingness to hold everyone equally accountable to the same set of laws and standards. In a mature democracy that India claims it is, there is no room for favouritism or leniency towards crooks especially when it comes to the public’s money and the health of the country’s publicly run banks.
The least the government owes its citizens is a dispassionate and thorough investigation into the allegations and sincere answers to the questions that have been raised. Replying with bluster, pulling out the patriotism card or alleging a conspiracy will serve no purpose. No individual is bigger than an institution and shouldn’t be treated as such.
