LIC, MFs, FIIs Bleed Rs 2 Lakh Crore in Adani Bloodbath; Discoms in Region and in India Cancel Adani Deals, Seek Better Rates

India’s power in decline, real increase in defence outlay lower than inflation, Sharjeel, Safoora made ‘scapegoats’ by bumbling cops, Ramdev booked for hate speech, Patanjali hammered, Musharraf dead

A newsletter from The Wire & Galileo Ideas | Contributors: MK Venu, Seema Chishti, Siddharth Varadarajan, Sidharth Bhatia, Sushant Singh and Tanweer Alam | Editor: Pratik Kanjilal

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Snapshot of the day

February 6, 2023

Pratik Kanjilal

As Adani stocks were hammered mercilessly following the Hindenburg report, LIC, mutual funds and foreign institutional investors (FIIs) together lost over Rs 2 lakh crore in just seven trading sessions. Going by the shareholding pattern of the December quarter, the three of them owned Adani stocks worth around Rs 3,98,563 crore on January 24, 2023, a day before the controversy erupted. It’s now worth Rs 1,90,782 crore, reflecting a loss of Rs 2,07,781 crore or 52% during the period. 

“The debacle could damage confidence in the rest of the Indian stock market. At their peak, Adani shares accounted for more than 6% of India’s two main exchanges; today, the figure is barely 3%. More troublingly, Adani’s fall could jeopardise the idea of India as the world’s next great hope as a driver of global economic growth,” reports the New York Times.

Aswath Damodaran, professor at NYU Stern and a top expert on market valuation, writes that “the market was overstretched when it valued the Adani companies collectively at $220 billion (Rs 17,600 billion) and Adani Enterprises at $53 billion (Rs 4,243 billion). In fact, a valuation of Adani Enterprises with upbeat assumptions on revenue growth and operating margins, and without factoring any of the Hindenburg accusations of fraud and malfeasance, yields a value of just about Rs 945 per share, well below the stock price of Rs 3,858 per share … even with the share price at 1,531 per share, I still think the company is priced too high, given its fundamentals (cash flows, growth and risk) and before factoring the damage that might have done to the company’s reputation and long term value, by this short-selling episode.”

With the Adani Group’s slide in for­tunes and the cancellation of the Adani Enterprises follow-on public offer, neighbouring governments are watching the company closely. The External Affairs Ministry made it clear that setbacks to projects would not affect ties, since Adani stock is “not a foreign policy issue”. According to United News of Bangladesh, the Bangladesh Power Development Board (BPDB) has demanded a price cut for coal to be purchased from Adani’s Carmichael Mines in Australia. Adani Power is reportedly billing Bangladesh $400 a tonne, far higher than the $250 a tonne that the BPDB is paying at other thermal plants. Other Adani projects in the region have been controversial, including in Myanmar, where the group exited the Yangon river port project in 2022 after the threat of US sanctions. In Sri Lanka, an uproar had followed the leak of a November 2021 letter from the Ceylon Electricity Board’s then chairman MMC Ferdinando to the Sri Lankan Finance Ministry asking them to al­low an Adani proposal for a 500 ­MW wind energy project off the coast of Mannar, and to treat it as a “proposal from the Government of India to Sri Lanka”.

UP power utility Madhyanchal Vidyut Vitran Nigam (MVVNL) has cancelled Adani Transmission’s bid for supplying 7.5 million smart meters worth nearly Rs 5,400 crore. According to sources, Adani Transmission had submitted the lowest bid but it was cancelled for “unavoidable reasons.” UP discoms — including Madhyanchal, Dakshinanchal, Purvanchal and Paschimanchal — representing different regions, had floated tenders for the supply of more than 25 million smart meters. The combined bid value was Rs 25,000 crore.

Three investment funds which bought into Adani Enterprises’ scuttled $2.5 billion offering have ties to the Adani Group and suspected Adani proxies, according to a Forbes analysis. Mauritius-based Ayushmat Ltd and Elm Park Fund, and India-based Aviator Global Investment Fund, together agreed to buy 9.24% of all shares available to anchor investors, the institutional investors who are allotted shares a day before the public offering. That was worth only $66 million, but is likely more evidence of Adani getting help from affiliated parties. The three funds’ ties to Adani have not previously been reported, and follow Forbes’ report on Wednesday that two of Adani Enterprises’ book-runners, Elara Capital and Monarch Networth Capital, were alleged to be Adani affiliates by Hindenburg.

As per the Lowy Institute Asia Power Index 2023, India is the fourth most powerful country, behind the US, China and Japan, but its overall score has declined every year since 2018. In 2022, India lost 1.4 points compared to 2021. India’s is ranked lowest on economic relationships, because it is outside the regional economic integration agenda. India punches below its weight in the region, as indicated by the country’s negative power gap score. 

A press release from the Defence Ministry claims that the 2023-24 defence budget “represents an enhancement of Rs 68,371.49 crore (13%) over the Budget of 2022-23.” But compared to revised allocations for 2022-23, which reflect actual spending, the rise is a paltry 1.5%. This would not be enough to offset the inflation rate of around 4% projected for the coming year, not to mention the effect that any further decline in the rupee’s exchange rate with the US dollar — the currency in which most of India’s payments for defence procurements are made — would have, writes Sushant Singh.

Former Pakistan president and army chief, Delhi-born Gen Pervez Musharraf passed away yesterday after a protracted battle with a rare health condition called amyloidosis. He was 79. Musharraf, who served as army chief for almost nine years (1999-2008), became the 10th president of Pakistan in 2001 and held the position until early 2008. Dawn describes his career transition from ‘military strongman to forgotten man of Pakistani politics’. His contribution in suggesting a new way forward on Kashmir, was the last we heard of rapprochement on that front. At the same time, he was the man behind the Kargil intrusions. Najam Sethi evaluates his role in an interview to Karan Thapar.

Indians are the third-largest group of migrants entering the UK via the English Channel in small boats this year, according to the UK Home Office. Officials are scrambling to find out what is driving the surge, which has prompted fears that “thousands more will follow”, given the country’s population of 1.4 billion, The Times has reported. About 250 Indian migrants entered the UK by this means in January, outnumbering the 233 in the first nine months of 2022. Indians now account for a fifth of 1,180 migrants who have attempted the perilous crossing this year. Afghans were the most numerous, followed by Syrians. Serbia’s visa-free travel rules for Indians could have been a gateway to Europe. Until December, Indian passport holders could enter Serbia without a visa for up to thirty days. The arrangement ended on January 1 as Serbia moved to comply with EU rules, and illegal traffic from India has turned to boats to the EU and the UK, Home Office officials say.

The Union Ministry of Electronics and Information Technology banned over 230 illegal betting, gambling and loan apps, mostly linked to China. They were “engaging in illegal money laundering and were posing threat to financial security of our nation,” said an official. 

“To show outrage has always been a Hindu nationalist technique. The Hindutva forces very often claim that they are under attack, that the Hindus are vulnerable, are victims. All majoritarian leaders cultivate and instrumentalise this feeling of vulnerability in spite of the fact that they are the real aggressor most of the time. How can BJP leaders justify the killing of women and children who have never shown any violent intention?” asks Christophe Jaffrelot about Hindutva outrage against the BBC documentary.

Chief Justice of India DY Chandrachud administered the oath of allegiance to the Constitution to five new judges of the Supreme Court today. That’s the largest number of apex court judges taking oath simultaneously in nearly two years. Nine judges were sworn in at the same time on August 26, 2021. Today’s swearing-in is also a sign that the court has prevailed over the government’s continuous attacks on the Collegium system, concludes The Hindu.

Assam Chief Minister Himanta Biswa Sarma is again courting controversy: after Assam Police arrested over 2,200 in a so-called crackdown on child marriage. “Families torn apart,” say the kin. Women across the state have demonstrated at police stations and sought the release of their husbands and family members, saying that families are without primary earners.

Giving the keynote address at the Asian College of Journalism, Indian-born Nobel laureate Venkataraman Ramakrishnan has said that Indian science is trying to recover ground after “stagnation” in the post-Nehruvian period, but there is still a long way to go. 

Despite threats and complaints, and accusations that he is ‘anti-Hindu’, scientist Cyriac Abby Philips has been highlighting liver damage caused by traditional medicine. The government has been promoting ayurveda as an alternative to Western medicine, but its benefits are insufficiently tested, he says.

“I am a proud Sanatani, and my religion instils in me the values of helping those who are honest. That's why I came forward as a surety for Siddique Kappan,” says Kumar Sauvir, a journalist in Lucknow. Hear him explaining why he stood surety for Kappan. 

The Asian Cricket Council (ACC) has put off a decision on the Asia Cup. In Bahrain on Saturday, members decided to continue “constructive dialogue” about the event, scheduled for August-September, and finalise the venue next month. The venue has become a sticky issue after the Board of Control for Cricket in India (BCCI) made it clear that the Indian team would not travel to Pakistan, which had hosting rights. At Bahrain, the sense was that the India-Pakistan diplomatic standoff should not be allowed to influence ACC matters, but it’s hard to navigate. The PCB bosses, current and former, have threatened to boycott the event as well the World Cup in October-November in India, if India was not accommodating.