The questions we received following our recent piece (Adani – Why we would never invest) on the rumourssurrounding the Adani group centred on the wider implications of the rumours swirling around the group. Having been in India when the story broke, I have to say that the local reaction was sanguine.
Part of the relative calm amongst local Indian investors may perhaps lie in the fact that foreign investors were quite significantly involved on the group’s share register. One or two of these have subscribed in a subsequent share offering. Given the Adani heavy indices it is also reasonable to assume that ETFs and index providers have been encouraged to rethink their weightings.
This foreign participation on the share register is replicated when one looks at the group’s bankers. As an aside, I would also say that since I started to invest in India in the late 1980s most other Indian corporates have probably never been in better financial shape, with gearing levels at historic lows. Even the once rather more leveraged Reliance Group has re-capitalised and reduced debt in recent years. In this environment, Adani stood out like the proverbial sore thumb.
Secondly, while there were fears of some fallout landing at PM Modi’s feet, this seems unlikely. While Adani built their early businesses in Gujarat, a State run at the time by Mr. Modi, it seems they are now so well spread across India, there are few state governments who are not involved. Although early days, it seems unlikely Mr. Modi’s popularity will be dented, and the recent State Polls have shown no sign of that. Most Indians have more important things to worry about.
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