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... me bad, I was and am watching the spin revolving around the Adani episode. I started doing so when Adani came up on the radar during early fall before his fall (hope you like the pun :0)
Asia’s richest man sees growing isolation for China
... until a few days ago, when predictably ... CPC China3 are on the radar
and allegations of fraud also surfaced
and now, suspect Bloomberg chimes in, which makes me doubly think 'they', the UK / US deep-state are in active motion to take down Adani and his friend Modi for reasons we can only guess at.
India’s Adani Is Not China Evergrande. It’s WorseBoth companies had accrued billions in debt, but the sell pressures are way more intense for the Indian tycoon. Shuli Ren6 February 2023 at 10:58 GMT+8
Skittish investors.
Photographer: Dhiraj Singh/Bloomberg6 February 2023 at 10:58 GMT+8Gautam Adani’s wealth wipeout has few parallels. His industrial empire lost about $112 billion, or roughly half of its market value, just seven trading days after New York-based Hindenburg Research issued a bearish report calling the Adani Group “ the largest con in corporate history” — allegations the company strenuously denies. Indian policymakers stepped in over the weekend to calm frayed nerves over concerns the turmoil would affect global investor sentiment toward the country.
Adani’s rapid unwind has surprised many. But this is not the first time emerging Asia’s conglomerates have been accused of poor governance, lofty valuation and even loftier debt piles. The likes of China Evergrande Group survived short seller attacks for years — until Beijing putits foot down. So why is Adani so vulnerable?
Bloomberg opinion In some ways, Adani is even worse than Evergrande, which, at its prime, accrued around $100 billion net debt, five times Adani’s level.In recent years, the powerful Indian mogul managed to attract blue-chip investors that specialize in ESG or low-risk corporate debt. But on the flip side, Adani has an investor base that is more skittish around market sentiments, and that means the selling pressure is a lot higher.
For many years, those who bought into Evergrande knew exactly what it was — an overleveraged empire that offered attractive yields and was perhaps becoming too big to fail. As such, those who purchased the junk-rated developer’s bonds tended to be hedge funds or private banks’ wealthy clients, who generally have a bigger risk appetite and tolerance than traditional asset managers.
Not so for Adani Group. Believe it or not, Adani Ports & Special Economic Zone Ltd. — the group’s biggest issuer in the dollar-bond space — is rated at the lowest tranche of the investment grade. So are Adani Electricity Mumbai Ltd. and Adani Transmission Ltd.
When private banks’ wealth clients buy investment-grade bonds, they often pledge them out for margin loans because interest rates on these notes are simply not lucrative enough. Indeed, at least two European banks had been offering to lend 75 to 80 cents for every dollar of Adani Ports bonds pledged, Bloomberg News reported. But when that kind of financing stops — as Credit Suisse Group AG and Citigroup Inc. have done — the ultra-rich no longer see any merit in holding Adani bonds. They sell.
By comparison, this kind of dynamicwas absent with Evergrande. Because of its junk grade, the developer’s bonds could never receive 80% loan-to-value ratio. And for years, its juicy coupon payments alone were sufficient for wealthy families to hold until maturity, despite daily market volatility.
Adani’s got more selling pressure from blue-chip funds, too. If there is any market speculation that ratings agencies might cut their bond ratings, asset managers with investment-grade mandates will have to sell, whether they like this company or not.
Further, because of its green energy ambition, Adani has attracted global ESG investors. This kind of moral money is happy to offer cheap loans but will not hesitate to divest if they sense anything dirty. For instance, following the Hindenburg report, Norway’s largest pension company KLP dumped all its shares in Adani Green Energy Ltd. The fund was worried that its “clean” investment could be siphoned off towards “some other activities we are not supporting,” such as coal mining. This clearly was not an issue for Evergrande, which never attracted ESG investors.
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Ultimately, Adani is a typical emerging market conglomerate. It is a family-run business that is not shy about cementing control and fueling expansion with debt. It runs the risk of poor governance, but also offers the potential to fast-track India into a modern-day South Korea. Yet it is at a stage of development that is too risky and opaque for blue-chip investors, who nonetheless had bought in and are now panicking.
As it happens, Adani’s investor base is already changing, with hedge funds and distressed debt investors scooping up its debt and traditional managers selling. That’s the way it should be. Emerging markets are a not a place for the faint-hearted or those who want their hands absolutely clean.
More From Bloomberg Opinion:
How ‘Madoffs of Manhattan’ Can Unravel Adani’s Empire: Shuli RenHindenburg Gives a Master Class. Adani Flunks: Andy MukherjeeIndia Can’t Afford to Get the Adani Affair Wrong: Mihir SharmaWant more Bloomberg Opinion? OPIN <GO>.Or you can subscribe to our daily newsletter.
(Adds moves by Indian policymakers in first paragraph. A previous version corrected the amount outstanding for Adani Ports in the chart.)
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
