[dailydriver]

Despite subscribing to the FPO (which has since been cancelled), LIC - apparently with long term interests in mind - is unwilling to pick up Adani shares that are available at a significant discount now.

Life Insurance Corporation (LIC) of India is not immediately planning to invest more in Adani Group companies despite the stocks being available at relatively much cheaper prices now.

The largest domestic institutional investor in India had subscribed to the Adani Enterprises follow on public offer (FPO) at the upper band of the price. The stock is now available at about 40 percent cheaper.

“We are not thinking of doing anything,” said M R Kumar, Chairman, LIC, talking to CNBC-TV18.

The insurance behemoth also clarified that the stock price has taken a hit in a very short time, and it was not suitable to take a call if the Adani stocks needed to be offloaded or any other action is required with regard to its holdings in Adani Group stocks.

Hot potatoes or due diligence?

Source: Moneycontrol

[CarNerd]

Originally Posted by SnS_12

It’s amazing when you look at the same story in different ways, it gives you a very different perspective.

Not amazing when you know the reasons behind such decisions:



The bank was fined by a Swiss court and it learnt a lesson the hard way. It incurred a $10 billion loss after the bankruptcy of fund partner Greensill Capital in 2021 and lost another $5.5 billion after the collapse of hedge fund Archegos Capital Management which led to its downfall. Wealthy clients pulled more than $100 Billion dollars from the bank in the fourth quarter because of scandals. It's in the midst of a complex turnaround plan to revive itself and gain investor confidence and there is no way it can be seen having any relation with a group like Adani.

[fhdowntheline]

We need to have an independent, strong regulatory framework that is not afraid to look at vested interests in the eye. At the same time, the Indian public needs to better their understanding of how regulatory agencies work, their powers and their distinct identity from the government of the day. Most importantly, we need to stop looking at the Western world for validation of everything.

[ShortShifter]

Originally Posted by sj_koova

Seriously! You really do not want to know the truth? There is no smoke without fire.
Why there is so much hesitation for a JPC probe? Hard to believe it is about time, unless you have made this statement based on an insider information.
Every member in the parliament is elected and their time is equally valuable.

Once again, it is about Adani, not against the nation and toolkit. Why portray a single individual larger than entire nation. It is only a private limited company with unusual amount of shares with one family.

Well the truth will eventually come, the country has no dearth of issues to discuss about, allegations on stock market manipulation can be taken care by competent authorities like SEBI, why waste parliament time ! Well i wished i had some insider info, would have provided a point by point rebuttal.

Also exactly my point 25 Billion Market cap does not make the individual or a private co larger than entire nation or economy nor does it warrant putting aside important issues like healthcare, education, nutrition of 1.4 Billion people and force adjournments in the parliament in lieu of a JPC (just to score political points). I still stand on my opinion that there are other platforms to discuss, investigate and serve justice if found guilty.

[jaaz]

If SEBI had acted, we wouldn't be discussing here nor anywhere else. Every institution in India is controlled by Politicians and now they want to control the Supreme Court also.

Instituitions should be governed by professionals without any interference from any quarters, but only regulated by Acts and Rules.

Every kind of Data is suppressed by GOI, so we need to look at data which is available outside our borders and correlate.

What's wrong in declaring top 100 loan defaulters in India?

[trippytragopan]

Originally Posted by jaaz

What's wrong in declaring top 100 loan defaulters in India?

12 Lakh crores disappeared into the thin air.
https://thewire.in/business/modi-gov...-12-lakh-crore

[itisK]

All this talk of JPC has really left me confused here.

Adani has businesses spread across 22 states in the country. That obviously includes states ruled by different political parties across the spectrum. Now, on the state level, these states have no issues whatsoever in working with Adani, inviting him for investments, rolling a red carpet for him, and what not.

After this news broke out, how many state governments have publicly backtracked on working with Adani? From what I remember, absolutely none.

But when it comes to JPC, we are expecting MPs of political parties from these states itself to somehow be able to uncover the truth? How is that supposed to happen? You expect them to do anything when it will adversely impact the image of their respective chief ministers? Whether you like it or not, such corporate houses have connections across the political spectrum

Never before I have seen such faith in the abilities and integrity of our politicians on this forum
.

[fordday]

Originally Posted by ShortShifter

allegations on stock market manipulation can be taken care by competent authorities like SEBI, why waste parliament time ! Well i wished i had some insider info, would have provided a point by point rebuttal.

SEBI didn't do their job so others took advantage of the situation and took a position and derailed the stock prices.

Actually the investors cannot be blamed. They all knew the inside stories and wanted to ride the wave till it lasts and they hoped the music will stop only after they get out of the party. But, as always, they got caught swimming naked.

And less said about the govt controlled investors like LIC the better. LIC wanted to buy in the FPO and and now does not want to invest anymore when the same share is available at 50% discount :-) What were they thinking at FPO time? Any due diligence?

[vishnurp99]

Originally Posted by fordday

SEBI didn't do their job so others took advantage of the situation and took a position and derailed the stock prices.

I don't think there is any real basis to this statement purely based on the fall in stock prices. This is not the first time the market cap for a listed company has halved. This has happened for many companies including firms like Infosys which has consistently demonstrated strong corporate governance. Some of you may remember how Infosys lost 75% of it's market cap in 2001 & 2007/8 and technology funds crashed.

Valuation bubbles happen for a variety of reasons. If you look at gold prices over the last 4 years, gold has practically doubled. That is an ROI of around 16-17%. Gold is an inflation hedge. Similarly infra companies are seen as inflation hedges. Just quoting an old post of mine to make the point.

Originally Posted by vishnurp99

The other thing is valuing infrastructural companies are complex. A bunch of large investors sees companies which owns ports, airports, has contracted tolling rights on roads etc as inflation hedges. As most market participants are aware, repeated quantitative easing and geopolitical conflicts has led to an anticipation of inflation from 2020 onwards. That has lead to greater focus on the infra sector. Adani is the most competent infra player in demographically young and fast developing India. There are china concerns because of geopolitical and demographic reasons. So it's natural that valuations rose for the most successful infra developer in India.

Coming to this matter of shell companies, I have seen reports which suggest that the trading volume from these companies are pretty low. So the shell companies have not been used to drive up valuations. It's most likely that the Mauritius shell companies were created for tax avoidance. This is perfectly legal.

Coming to the matter of related party transactions, I have talked earlier about how various laws in India have contradictions on how they define related party transactions. This is an area for the legislators to clean up but this will take time. If you have been watching the market related news, you will see how there has been back & forth around these regulations.

Now on the topic of market cap, I wanted to give a perspective. We keep hearing about how Alphabet or Meta or even Adani has lost a $100 B in market cap. Tesla apparently lost $800B in market cap. In my opinion, this is a misleading headline. When there is bad news, most investors, especially the large institutional ones hesitate to deploy fresh capital. They want to wait & see and when they deploy it's usually in hundreds of crores. In-experienced retail traders hurry to get out because they are worried about their principal and they dump their shares. Lack of new buyers would mean that the share price drops dramatically. Now marry that with some coordinated short selling, the impact could be tremendous. Now this doesn't mean that $100B USD has been lost in the market on that day. For all you know, depending on the kind of shorting, there may be massive short covering which will need to happen in a few day's time or may be a few week's time or even a month's time and the price will recover.

By the way, this is not really a justification for Adani but making the point that the regulations in India are not as broken as some of these posts make us believe. Now an open ended JPC investigation would be seen as an acknowledgement globally that something is really broken in our markets. Now that would be the day our markets really crash!.

Now coming specifically to Adani, I think we need to watch out for the news. If you have Adani stocks, your biggest concern has to be around the earnings/balance sheet and whether numbers were fudged there. So far, I haven't seen any strong evidence for that but that doesn't mean that there is no problem. So will keep my fingers crossed over Adani!.

[Fuldagap]

Hiring of Wachtell by Adani to set things 'right' in the US of A, it's indeed going to be a massively entertaining duel. There has been no 15 days since 2014 atleast, that we have been seeing something or the other, really fascinating stuff, for the masses to enjoy.

Surfing the net, stumbled upon this another interesting website I had no idea existed or the 'project'.
https://www.adaniwatch.org/about

[whitewing]

Originally Posted by vishnurp99

...
Coming to this matter of shell companies, I have seen reports which suggest that the trading volume from these companies are pretty low. So the shell companies have not been used to drive up valuations. It's most likely that the Mauritius shell companies were created for tax avoidance. This is perfectly legal.

It is actually the low float companies that price rigging can happen more easily (needs lesser money). The other accusation is of round tripping.
Low float combined with round tripping is a model to jack up prices for perpetually.

In companies with large float and wider holding, the market arrives at a consensus price since there is limited opportunity to nudge the price beyond a certain limit and for a certain time.

Shell companies in this case have been accused of both being entities for parking the shares (thereby reducing the real market float to <10%) and indulging in round tripping. Of course, these are allegations, nothing proven yet.

Originally Posted by vishnurp99

Coming to the matter of related party transactions, I have talked earlier about how various laws in India have contradictions on how they define related party transactions. This is an area for the legislators to clean up but this will take time. If you have been watching the market related news, you will see how there has been back & forth around these regulations.
...

Since "apparently" SEBI has been looking into this since 2021, we would know in some time (years??) if there was a violation of the existing rules.

[trippytragopan]

Originally Posted by vishnurp99

So the shell companies have not been used to drive up valuations. It's most likely that the Mauritius shell companies were created for tax avoidance. This is perfectly legal.

Tax evasion is definitely not legal in India.

[vishnurp99]

Originally Posted by whitewing

It is actually the low float companies that price rigging can happen more easily (needs lesser money).

Well Adani had a $200B USD market cap. My understanding that these shell companies would not have more than 1-2% of the total market cap if at all that. That's not significant enough to materially affect the stock price unless these entities do a lot of volume selling depending on price movements. The reports don't suggest that is the case. That was the limited point that i was making. Please share if you have a different understanding.

All said & done, Based on the publicly available information, Adani is the most competent/audacious? infra player that we have in India. That's the reason Vizhinjam (Congress & Left) & Tejpur (TMC) ports were awarded to Adani by state governments which have an adversarial relationship with the center.

As I said earlier, we will have to watch out for the news and see if anything really damaging comes out around the veractity of earnings similar to the Satyam story. In the Satyam story, cash recievables, employee count etc was overstated. There has been no indication of that yet.

[whitewing]

My response was w.r.t the point you were making on low volume trade not leading to rigging the share prices

Originally Posted by vishnurp99

I have seen reports which suggest that the trading volume from these companies are pretty low. So the shell companies have not been used to drive up valuations. It's most likely that the Mauritius shell companies were created for tax avoidance.

My point that low volume trades make it easier to jack up prices (since it needs lower capital to keep process at artificial levels).

Quoting from the hindenberg report (while not FPIs are Adani holdings, the accusation is that a large % of the holding are under their control)

The total stockholding of all offshore foreign funds (FPIs), including smaller funds (below 1%) and large funds (above 1%), in Adani listed companies is, per the latest disclosures: Adani Transmission (19.32%), Adani Enterprises (15.39%), Adani Power (12.88%), Adani Total Gas (17.25%), Adani Green (15.14%), Adani Ports (13.76%), and Adani Wilmar (1.57%).

This, in addition to the ~74% they hold as publicly disclosed promoter holdings.
Now, this report is not a gospel. But the point is, if true, they used the shell companies to rig the prices.

Originally Posted by vishnurp99

The reports don't suggest that is the case. That was the limited point that i was making. Please share if you have a different understanding.

Which report are you referring to?

Originally Posted by vishnurp99

Adani is the most competent/audacious? infra player that we have in India.

How good a infrastructure developer Adani is a different debate from the question - did Adani manipulate the stock prices?

[vishnurp99]

Originally Posted by whitewing

Which report are you referring to?

You can look at Mr Damodaran's DCF valuation report on his blog. This is purely around the charges of market manipulation/price rigging using shell companies as alleged by Hindenburg. Quoting from his blog.

To be able to manipulate and move the market capitalization of a company by a hundred billion, roughly the increase in value in 2022, you would expect to see huge numbers of shares being traded by these entities, and I don't see that.

I am skeptical about the stock price rigging charges using shell companies because of other reasons too. If we look at Adani Enterprises holding of these large so called shell companies like Elara capital, I believe the holding has dropped substantially from 2020 onwards. Elara capital used to have around 5% of Adani enterprises if you look at older disclosures. The Dec BSE disclosure that you shared suggests that the percentage is 1.6%. That is what you would expect a typical shareholder to do. Basically cash out over a year long rally in Adani prices especially when you feel that valuations are getting stretched.