The Adani affair

Doubts about India's corporate governance norms and integrity of its financial markets?

The sharp downturn in the stock prices of the Adani group companies since the publication of the Hindenburg report on January 24, 2023, has been tracked exhaustively by Indian and international commentators. However, there is no readily available information about whether the shorting of hard-currency bonds or any other securities of the Adani companies was on foreign stock exchanges or by using over-the-counter derivatives. It is unlikely any shorting was done by foreign institutional investors (FIIs) registered with the Securities and Exchange Board of India (Sebi) since it would have been difficult to hedge the risks involved without getting detected. The broader issue is whether there were any significant regulatory shortcomings or outright failures, given the economy-wide backward and forward linkages of the Adani companies via the capital markets and banking sectors of the country. Accordingly, this article reflects on the alleged negligence of Indian regulators in the context of the anti-climactic return of capital to those who had subscribed to the Adani Enterprises follow-on public offer (FPO) of Rs 20,000 crore.

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