ADANI EPISODE ILLUMINATES SEVERAL 'WEAK' LINKS, HIGHLIGHTS CHALLENGES

THE HINDENBURG report has several fallouts, many lessons. It has wiped out about $100 billion in market capitalisation of the Adani group. Many others with similar business structures and practices will be impacted.

- Vikas Singh

Extrapolating the Adani trouble to the economy is fear mongering: India is resilient. The economy is clearly on a very strong growth path. India ranks better in terms of corporate governance metrics compared to most emerging markets. Governance standards of larger Indian companies are improving.

A majority of the top 500 listed firms have real assets, paying customers, and ‘good’ governance track records. Most amongst them are growing, making profits, paying taxes, and adding stakeholder value. They are well regulated, ‘measured’ by the customers for quality and price. The books are audited and the business models tested by competitive forces. Their performance is scrutinised by legions of funds and other shareholders, every day. There is no manipulation, no fraud here.

The MSMEs and ‘others’ in the value chain, contribute over a third to the GDP. They pay taxes, run businesses, create jobs. Most are not leveraged. They are the growth engines. The equally important and relevant issue of the ‘collateral’ damage is clearly overblown. It is largely contained. The domestic banks are not vulnerable. The exposure to the Adani group is not ‘significant’, and ‘protected’ by the underlying assets, operating cash flows and projects ‘under’ implementation. Exposure to the pledged shares has several ‘safety’ clauses.