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Can Gautam Adani weather the storm?

wNew York hen The short seller’s report wiped out about $150 billion, or two-thirds, of the total value of Adani Group’s listed properties in late January and early February There were several big questions keeping India Inc up at night . Will Indian banks and insurers with significant exposure to the port conglomerate swing to energy? Will the infection spread to the rest of the Indian financial world? And will the Government of India pursue a vigorous investigation into the short sellers’ allegations of fraud and stock market manipulation, which triggered the impasse (which the Adani Group vehemently denies)?

After a month and a half, the answers to the first two questions were, fortunately for India, ‘No’. The answer to the third question is less definitive and somewhat less constructive: the government appears to be in no rush to settle the matter, perhaps because the modest free float of the Adani companies means few large shareholders take so much pain and don’t get angry. Mobs of retail investors are pressuring Delhi to get to the bottom quickly. With those big questions out of the way, attention has turned to the next conundrum: Can the Adani Group and its eponymous founder, Gautam Adani, recover? Or will they establish, and perhaps take with them the grand plans of the Indian government for investments in infrastructure and green energy?

The past month has offered hope to those rooting for Mr Adani and his business, which operates some of India’s largest ports and airports, stores a third of its grain, operates a fifth of its power transmission lines, produces plenty of cement — and has its eyes on clean hydrogen and steelmaking, among other ventures. . The group’s total market capitalization rose again to more than $110 billion, from a low of $82 billion. The value of its leading public company, Adani Enterprises, is up 54% from its February 27 low. Bond yields issued by some aggressive companies have fallen from levels indicating distress.

The big turnaround in the Adani Group’s fortunes came in early March, next GQG Partners, a fund based in America, listed in Australia and managed by an Indian, bought $1.9 billion in shares of several group companies directly from the Adani family. on time, GQGHis boss, Rajeev Jain, who lives in Florida, told L.L.C financial times that “the market was mispricing Adani” and praised the “extremely competent management” and “remarkable” execution capabilities of the group.

Adani used the proceeds to help pay off $2.1 billion in margin loans that used shares of Adani’s companies as collateral, mitigating one potential source of financial stress. Another $1.1 billion, half from Adani’s family and the other half from Adani’s business cash flow, was used to meet other near-term commitments. These moves reduced the debt owed to the group by just 4 percent, to $27 billion. But they eased the pressure and reassured the market. So did the acquisitive conglomerate’s decision to pause new capital investments, beyond those it has already committed to, until September 2024, and to suspend large acquisitions.

With these demonstrations of financial discipline happening, the Adani Group has embarked on a global witchcraft offensive, set to end on March 17th in California. It appears to be working. Mr. Jain, for example, said GQGAdani’s stake in Adani’s business “will likely increase depending on the price and how it is presented.” The group says it has received a lot of interest from investors looking to put their money into its diversified companies. It says a recent news report of selling just under 5% of its cement operations is fake. But it does not rule out the possibility of selling stakes in some of its divisions. Many of these operations, such as the port business, are solid operations that offer predictable returns – perhaps even good returns, if the Indian economy continues to grow at its recent pace of 7-9% per annum.

With the Adani Group on more stable footing, another question is bound to arise: How long can Mr. Adani get his state-building ambitions in check? On March 1, his giant bauxite mine collection was awarded at a government auction. For now, the asset, which the company had always planned to bid for, will be merged into Adani Enterprises’ mining company. But before the short seller’s attack, the mine’s bid was widely seen as part of a larger plan to get into aluminum smelting, steelmaking, and other pieces of heavy industry. It is unlikely that Mr. Adani will abandon this idea forever.

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