Rise After a Fall: Adani Group Stocks Rebound Amid LIC Investments and BJP Support

On January 24, US-based short selling firm Hindenburg Research dropped an explosive report alleging decades of “brazen stock manipulation and accounting fraud scheme” by the Adani Group.[0] The report, which accused the Indian billionaire Gautam Adani of pulling the “biggest con in corporate history,” sparked a market rout and immense scrutiny of the multi-billion dollar conglomerate.[1] Adani hit back, calling the report “malicious,” “baseless,” and a “calculated attack on India.”[2]

The Union Minister of State for Finance Bhagwat Kisanrao Karad revealed in the Parliament on February 7, 2023, that the Life Insurance Corporation (LIC) had invested Rs 30,127 crore to purchase equity stakes in various Adani group companies.[3] The minister also said that the total purchase value of equity, purchased over the last many years, under all the Adani group companies was Rs 36,474.78 crore as of date.[4]

The Adani Group stocks started to rebound, with Adani Enterprises witnessing a surge of 35 percent.[5] As of Monday, February 6, the shares of Adani group companies had lost a combined total of around $110 billion from their estimated valuation of $218 billion when Hindenburg Research’s report was released.[6]

Hedge funds that previously stayed clear of stocks and bonds linked to Gautam Adani’s empire have jumped in after a more than $100 billion wipeout in the group’s market value.[7] The bonds and stocks are attractive to investors due to the strong assets and cash flows of Adani ports, power and green energy companies, which will ensure debt is serviced and that investors will be shielded from any losses resulting from any future defaults.

LIC reported a net profit of Rs 6,334 crore in the December quarter as against Rs 234.[3] Nine crore last year.[8] By December 31, 2022, the insurer’s AUM had risen by 10.5% to reach Rs 44.34 lakh crore, compared to the Rs 40.12 lakh crore recorded in the previous year.[8]

The Adani-Modi relationship has been a major point of contention for Indian opposition parties, who point to the extensive support from the BJP government that the Adani group has received.[9] The ties between Modi and Adani go back decades, with Modi flying around in an aircraft that bore Adani’s name during his first electoral campaign for Prime Minister.[10]

0. “NYU’s ‘Dean of Valuation’ says Adani Group exploited ‘weakest links’ in Indian institutions” CNBC, 9 Feb. 2023, https://www.cnbc.com/2023/02/09/nyus-aswath-damodaran-adani-exploited-weakness-in-indian-institutions.html

1. “Adani issue: Group stocks register recovery, politics continues” The Tribune India, 8 Feb. 2023, https://www.tribuneindia.com/news/nation/adani-issue-group-stocks-register-recovery-politics-continues-477829

2. “Nationalist Narrative, Same Spelling Error: How Fake News Chains on Hindenburg-Adani Used Twitter” The Wire, 9 Feb. 2023, https://thewire.in/politics/nationalist-narrative-same-spelling-error-twitters-fake-news-chain-on-hindenburg-adani-report

3. “LIC will soon contact Adani top management to understand the issues, says Chairman Kumar” Moneycontrol, 9 Feb. 2023, https://www.moneycontrol.com/news/business/lic-will-soon-contact-adani-top-management-to-understand-the-issues-says-chairman-kumar-10043791.html

4. “LIC chairman on Adani Group: ‘Haven’t reduced exposure, but…’” Business Today, 9 Feb. 2023, https://www.businesstoday.in/latest/corporate/story/lic-chairman-says-havent-reduced-any-exposure-to-adani-group-but-want-them-to-throw-some-light-369711-2023-02-09

5. “Adani Stock Rebound Accelerates Amid Steps to Ease Debt Concerns” Bloomberg, 8 Feb. 2023, https://www.bloomberg.com/news/articles/2023-02-08/adani-group-shares-extend-gain-as-traders-await-earnings-reports

6. “Adani Stocks Climb After Eight-Day Rout Wiped Out $118 Billion” Yahoo! Voices, 7 Feb. 2023, https://www.yahoo.com/now/adani-stocks-trade-mixed-investors-040520886.html

7. “Hedge Funds Hunting for Adani Bargains Are Using This Playbook” NDTV Profit, 9 Feb. 2023, https://www.ndtv.com/business/hedge-funds-hunting-for-adani-bargains-are-using-this-playbook-3766919

8. “LIC Chairman says, will meet Adani Group top management soon” The Indian Express, 9 Feb. 2023, https://indianexpress.com/article/business/lic-chairman-adani-group-management-8435298/

9. “Allegations of Adani Group corruption shake India’s financial markets, Modi government” WSWS, 9 Feb. 2023, https://www.wsws.org/en/articles/2023/02/09/jbtl-f09.html

10. “Adani Scam Tests the Credibility of India’s Institutions” The Diplomat, 7 Feb. 2023, https://thediplomat.com/2023/02/adani-scam-tests-the-credibility-of-indias-institutions