Home / Opinion / Views /  Adani fiasco: Watchdog alertness is under watch

If the mercurial rise of Adani Group stocks and its promoter in recent years had held observers spellbound, their crash has been even more stunning. Gautam Adani’s businesses have lost more than $100 billion in market value since a 24 January report by US-based short-seller Hindenburg called it “the largest con in corporate history", alleging financial fraud and stock puppetry done by swirling money around in patterns that the group’s rebuttals failed to lift suspicions over. As the scandal rippled across the financial system, with a domestic public offer scrapped by Adani and its debt notched down globally, India’s finance ministry had to calm fears over the exposure of state institutions (a reference mainly to our top insurer and lender) to the besieged group, even as the Reserve Bank put out data on the size of its bank loans to reassure aghast citizens of systemic stability. After stock exchanges put three Adani stocks on volatility watch as required by the rules, pushing margin money on their trades to the hilt, the Securities and Exchange Board of India (Sebi) issued a public reminder of its commitment to market integrity. To observers with a Sherlock bent, however, that avowal does not put to rest the curious case of a watchdog awakened late.

Pressure on Sebi to probe Adani’s financial structure stems not just from immediate loss anxiety among investors as adverse signals accumulate—the group’s ouster from S&P Dow Jones Sustainability Indices caused shudders, as did news of its bonds rejected as collateral by Citibank and Credit Suisse—but also from a threat to India’s global reputation for well-regulated capital markets. That this could prove far costlier, by upping the risk premium on Indian assets, say, may have prompted the ministry to speak of regulatory autonomy as an assurer of safety. Sebi, on its part, sought to assure investors of the efficiency and stability of our equity market. Such averments, per se, cannot counter whiffs of alleged top-level cronyism picked up for comment by foreign analysts, worsened by a clumsy defence of Adani in social media spaces often seen to relay the ruling party’s view. In such a situation, the value soars of a look-in that can be trusted widely to be free and fair. So far, the back-and-forth between the accused and accuser over specifics has left an impression of oversight laxity, to say the least. In a lengthy rebuttal statement, Adani denied any related-party dealings that were not at arm’s length and kept undisclosed, deflected queries on any role played by the promoter’s elder brother, and also declared as closed (and duly disclosed) all past enquiries by Sebi of stock manipulation.

The shake-up we have witnessed demands that we take the country’s broadest interests into account. Willy-nilly, the Adani short-seller’s allegations are out there, and imprints formed by those dots added up have hardened perceptions of something amiss in India’s institutional set-up. Financial globalization draws strength from the logic that capital works best under the discipline of market forces in alliance with fair regulation, sans double standards. At this stage of our economy’s emergence, with global capital crucial for progress and India on the ‘China plus one’ investment map of many multinational corporations, we just cannot afford an image of faltering institutions. How justice works in the country has been facing criticism. How business functions is now under a scanner. The Adani episode should serve as a call to action. We need a proper probe, one that enhances the credibility of our vigilance.

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