Ep. 87: The Adani Group may not be derailed by Hindenburg

There is good news and bad news in the withering attack by a little-known entity called Hindenburg Research on the Adani Group on the eve of its FPO on January 27th. The bad news is that vultures from international capital markets have decided to latch on to an Indian infrastructure firm and beat it into the ground. 

The good news is the same. India has now become important enough for the bottom-feeders to attempt variations of ‘pump and dump’. 

Speculative attacks on national currencies, commodities, and specific companies are not unusual. George Soros made $1 billion in one day in 1992, shorting the British currency. I speculate that Britain has never quite recovered. (He repeated his feat with the Thai baht and the Japanese yen, though with not quite as much success). The Texan Hunt brothers cornered the silver market around 1980, but ended up failing spectacularly. 

All sorts of companies have been the targets of short-sellers, including Tesla, Apple, and Alphabet. The results of these big bets have been mixed. We shall have to wait and see what happens to Adani, although the usual suspects are chortling. 

The Financial Times, for instance, cannot contain its excitement. As Diva Jain pointed out on Twitter, they carried both the Adani story and a whine by Ramachandra Guha on its front page. Along with a series of other assaults on India, the Hindenburg report signals two things: Election Season 2024 is upon us, and there will be unrestricted warfare, including riots by ‘students’.

I can think of several reasons that the Adani Group has been selected for this ‘honor’:

1. Adani has indeed shot up in meteoric fashion in the recent past, and yes, the P/E ratios are a little outrageous

2. Adani does have a web of related entities

3. But then, consider: Adani is from Gujarat, and is considered close to Narendra Modi

4. Modi has irritated the Deep State by refusing to go along with the Ukraine charade

5. Modi is anyway in the gun sights of the Deep State and the Democrats (but then, I repeat myself) as they much prefer the pliant Dynasty

6. India’s massive infrastructure push and potential rise as a manufacturing power are anathema to a) China, and b) well-connected economists like Raghuram Rajan

7. Adani has real assets in energy and infrastructure such as ports, unlike, say, oh, FTX

8. Adani is now competing with China on ports, eg. Vizhinjam and Haifa

9. Adani has recently bought NDTV, one of the prime anti-national narrative-makers

India is finally putting into effect an industrial policy, which often ends up in picking winners. That is something America did in the 20th century, when the Rockefellers, Carnegies, Standard Oils and General Motors were often given free rein. In the immortal words of a high official, “What’s good for GM is good for America”. Let me clarify that I am not supporting the excesses of the Gilded Age, but it is normal for national champions to get special treatment. 

Hindenburg’s back story is not salutary: they seem to be one of the class of bottom-feeders who create bad news and then benefit from it through short-selling by themselves or their clients. These are universally loathed by investors because others’ misery is their goal. It turns out Hindenburg is under investigation for malfeasance, including by the SEC and the DoJ, according to Business Today. 

According to Hindenburg, they have been ‘investigating’ the Adani Group for almost two years. Interesting. Then how come these do-gooders did not ‘investigate’ FTX? A Google search failed to turn up a single link that showed Hindenburg shorted or even wrote a report on FTX, which has actually swallowed at least $8 billion in real money by speculating on thin air, ie crypto.

That can easily be explained by the fact that FTX’s Sam Bankman Fried was the second-biggest donor to the Democrat election machine: $30 million in direct donations, and probably untold hundreds of millions to the opaque leftie ecosystem. Therefore FTX gets ‘immunity’, even though its ‘related entity’ links cannot even be depicted in two dimensions: it’s so complicated. 

So the narrative is the thing (thus anger over NDTV). By attacking Adani, which, I repeat, has real assets, unlike FTX’s vaporware, the Deep State is attacking the entire India growth story. There are indeed the BBC hatchet job documentary, the Oxfam report, the inevitable Sadanand Dhume in the WSJ lauding the likes of the discredited Vdem and Freedom House, and Ashoka Mody’s new book, “India is Broken” (I haven’t read it, but what a great clickbait title!). 

I watched with amusement and alarm the Vatican-led attack on Vizhinjam port in my backyard, under the guise of ‘fishermen’s rights’ and coastal erosion. The amusing part is that the sea has actually retreated at least 200 meters in the last few months. But, like the Koodankulam and Sterlite agitations, this was part of an attempt to denude the coast of important infrastructure; the deep-water Vizhinjam port is a strategic asset being built by Adani Ports. 

So far as I can tell, there are three main objectives: 1. Short-term profits, 2. Preventing the rise of Indian manufacturing, 3. The return of the Dynasty so that India can continue to be an uncomplaining vassal to the West. Yes, the good old days as Abhishek Banerjee pointed out on Twitter. India is supposed to continue to be poor, and getting poorer. That must be what the “liberal, rules-based international order” sees as India’s role in life. 

Not only India’s barbarians within (oops, read ‘liberals’). But also Deep State and its flunkeys such as the British Foreign Office, the FT, the Economist, the New York Times, and NPR. I have just one word for them: Cope.

At the end of the day, the run-up in Adani shares led to paper profits for the company and its investors, for example LIC, at the cost of retail investors (including me: i have a small position in Adani Ports). The paper loss now of $50 billion is coming in the background of a $70 billion run-up. It also turns out that a significant portion of Adani’s debt is held not by Indian banks, but by foreign banks. Any default and contagion may well spread far from home. So Hindenburg and pals may end up with a Pyrrhic victory. But I’m betting on Adani, at least for the moment. 

1040 words, Jan 28, 2023