Adani takes centre-stage again – Issue #69
Despite Adani's growing influence in India's economy, regulatory bodies like SEBI have shown little inclination to investigate. Even a Supreme Court committee's efforts seem inconclusive.
The Big Picture
The Adani Group is back in the headlines.
Last week, three global publications – OCCRP (Organised Crime and Corruption Reporting Project), Financial Times and the Guardian – established links between two mysterious offshore accounts invested in Adani Group companies and the family.
As Hindenburg had shown in its report, a sizeable chunk of the free float of Adani group company shares is owned by a clutch of offshore investment funds. Whose money these funds directed into Adani companies was unclear. The effects were clearer. As the short-seller alleged, these funds were manipulating Adani share prices – boosting share values well beyond similar companies, making it possible for the group to raise large sums of money by pledging shares at unreal valuations.
Despite the rising centrality of the Adani Group to India’s economy, SEBI has shown little appetite to investigate. Even the committee set up by the Supreme Court after the Hindenburg report called the search for the funds’ owners a likely “journey without a destination”. Well, a partial answer emerged last week. Investors in two of these funds, Emerging India Focus Fund and EM Resurgent Fund, have close links to the Adani family.
What happens next? As expected, Adani shares fell. What about deeper impacts? Market analysts do not expect Indian regulators to take cognisance of these revelations. Even earlier, SEBI’s investigation had veered off track to investigate 12 firms that shorted Adani after the Hindenburg report – as opposed to checking if Adani had indeed manipulated its share prices through these investment funds.
And yet, Adani isn’t out of the woods. The group had been borrowing increasingly from the global bond market to finance its extraordinary expansion. After Hindenburg, those loans got costlier. Between Deloitte’s exit and these revelations, the group will struggle further to tap such funds. So far, only one firm, GQG Partners, is investing in Adani. Speculation about its antecedents is high as well. The Group is looking to raise more from within India, but interest from domestic investors like mutual funds, etc, is low. With elections coming soon, political risk perceptions will stay high as well.
In all, Adani might have to fall back on more hard-nosed lenders from the Middle East or Russia. However, The bigger variable is whether the US Securities and Exchange Commission (SEC) will launch an investigation into Adani. After Hindenburg, the SEC asked American institutional investors about the representations made by the Adani Group to them. At that time, the Group had denied knowledge of any such investigation. This speculation, however, has resurfaced now.
That is the calculus of this moment. One sees social media and sees robust domestic defence of the group amplifying the insinuation that these reports are a George-Soros sponsored attack on India.
Reading these defences, two thoughts come to mind. One, why is the Indian government backing a private company to corner off all these trade volumes, as opposed to using state-owned firms like JNPT (or a clutch of firms) as India's vanguard into global markets? Such a demand came from Sri Lanka last week, asking for a wind project awarded to Adani Green Energy to be converted into a G2G deal.
Two, given how cut-throat geopolitics is – and given the lack of clarity on ultimate owners of the Adani group and persistent charges of misgovernance, isn't Adani a soft target for "unfriendly actors"?
And yet, the Indian state perseveres – supporting the group with all its might.
The big PSU recalibration
Other news. We already know Coal India is mulling a reset to survive the energy transition. Last week, we learned Indian Oil is embarking on a pivot as well. Now comes news that ONGC and BPCL are mulling similar shifts as well.
This is getting interesting. Coal India had wanted to get into energy-intensive manufacturing. Indian Oil wanted to diversify into green hydrogen, EV charging infrastructure and other infrastructure that lets electric vehicles swap chargeable batteries. What about ONGC and BPCL? ONGC wants to focus on renewable energy, green ammonia and offshore wind energy projects. As for BPCL, it will invest one trillion rupees between now and 2040 into projects like green hydrogen, carbon capture, utilisation, and storage (CCUS) and improving energy efficiency to cut emissions.
There is a larger story here – on how these diversifications are being mapped out? Are these processes being led by the oilcos themselves? Or is the government playing a role? If so, what is the larger design?
Auctions on the cards
Continuing with the energy transition, India will soon start auctioning critical mineral mines. According to a report in Economic Times, the Mines Ministry wants to put as many as 100 critical mineral deposits – for nickel, platinum, cobalt, lithium and rare earths -- on the block in the next four months. “The tender seeking bids is expected to be out by December and auctions may start three months later,” wrote ET.
RIL details its energy ambitions
Other RE news. Mukesh Ambani-led Reliance Industries is looking to collaborate with large international wind equipment manufacturers to set up its ambitious wind energy business. “One of the significant cost drivers in the manufacturing of wind blades is carbon fibre,” said Ambani last week. “Our foray into manufacturing carbon fibre at large scale provides a unique advantage to further integrate and reduce cost of wind turbines.”In its AGM, the group also said it was on track to bring down the cost of green hydrogen production to $1 per kilogram. “Ambani said India is facing an "energy trilemma", for which Reliance has a practical solution to offer,” wrote MoneyControl. “The ‘Energy Trilemma’ demands action to overcome three challenges, he said. One, affordability of energy; Two, sustainability of energy; Three, security of energy.”
Despite their great ambition, Reliance’s RE plans have not received the media attention they deserve. Here is an early guess at what the group is planning. More updated reporting on this, however, is so badly needed.
In other news
India's finance ministry is considering a proposal to include electric vehicles under the Reserve Bank of India's priority sector guidelines, a move that would make it cheaper to raise funds.
Turning to fossil fuels, the Indian government has cut both domestic and commercial LPG rates. This is not a government handout, reported Economic Times. Oilcos will have to take the bit on their books.
Turning away from energy, Adani’s Dharavi development plan is throwing up some worrying details. “Only those who already lived in Dharavi before 2000, mostly ground-floor residents, will get free homes within the redevelopment,” said Business Standard. “About 700,000 inhabitants of mezzanine and upper floors are considered ineligible by the government and will be offered units up to 10 kilometers away.” Read the whole report. Also came news that high PM 2.5 numbers are reducing the life of the average Indian by 5.3 years. In Delhi, that number stands at 11.9 years.
All the news about Adani obscured another big OCCRP investigation last week. This one, by reporter Akshay Deshmane, looked at Vedanta’s successful attempts to weaken oil and mining regulations in India.
Must-have Matryoshka doll
“Sea Matryoshka (A whale eats a seal that eats a penguin that eats a fish that eats a calamari that eats a sea cucumber, and finally, there’s a plankton)” Nesting dolls created in Semenov, Russia for the Helsinki-based studio COMPANY.
https://twitter.com/ConradkBarwa/status/1697852073507717528
Video of the week
Ravi Nair and Anand Mangnale talk to The News Minute about the OCCRP investigation into Adani.
Climate long-reads of the week
Clean energy startups innovate on products to aid farmers, rural areas(Mongabay)
Greater Dhaka: Making liveable city in times of Climate Change is all politics and planning (Question Of Cities)
Plan for 55,000-acre utopia dreamed by Silicon Valley elites unveiled(Guardian)
Isabella Weber Has Neoliberal Economists Running Scared (Jacobin)
Uttarakhand and the Futility of Trying to Determine 'Carrying Capacities' of Towns (Wire)
Should rural India drink urban wastewater? (Mongabay)
How Vivek Ramaswamy makes money from climate denial (Emily Atkin)
How Pakistan's electricity crisis is leading to rising spectre of social unrest (ET)
Why states in the North East are opposing the new forest law (Scroll)