Brij Bhardwaj
There will be hardly any impact on Indian economy or on Indian banks as a result of downfall in the values of Adani companies’ following the report of the U.S based short sellers firm alleging irregularities in firms managed by the Adani family. There is no doubt that Adani firms, whose value has fallen by over fifty percent, will take a long time to recover and they may face problems in getting bank loans or making fresh investments.
As far as Indian banks are concerned their exposure in Adani companies form a small part of investments made by them in different stocks and will be covered by assets belonging to companies in the group. It should also be kept in mind that fresh issues being withdrawn or shares of company falling is not new or unique as it happens in every country.
What is important is how our stock market, banks and regulators deal with it. It would be foolish to link it with the performance of Government. Indian economy is robust enough to overcome any such a storm, which, at best can last for few days or at worst for a month. After all investments’ made in infrastructure projects like ports, airports, green energy projects, naming a few, cannot disappear into thin air.
There is no denying that sudden rise of Adani group whose share values rose like a rocket, will now become a part of realities. The spirit of adventure shown by them, which led to spectacular rise, making head of the group third richest man in the world has now come down to seventeenth position. In future group will remain an important player but not a top player. We have witnessed over the years a slow rise even by players who broke many records like Reliance or Microsoft, but they also took few decades instead of touching the moon in few years.
Any group which rises as fast as Adani is bound to cut few corners and invite critics. Will Indian regulators be able to ensure the investors in India and in the world financial markets that Indian market is stable and well regulated and can take care of any such storm by taking action, if called for. Indian Finance Minister has done well by distancing the official agencies from happenings in Adani group. She has also declared that the regulators will take care if any wrong has been committed.
The Reserve Bank of India has started finding out to what extent Indian banks will be impacted by fall in value of shares belonging to Adani Group. The SEBI is also expected to take steps to make sure that huge volatility in Indian share market is kept in check. Politicians and political parties will draw their own conclusions, but care has to be taken to ensure that Indian growth story is not impacted.
There is no doubt that what happened in Adani group can neither be described as attack on India nor can it be described as a normal act as it has shaken few important pillars. Such adventurers will rise in future also but care has to be taken to make sure Indian stock market, as well banks are well regulated to keep interest of investors and depositors safe. It is true that many well healed borrowers have taken shelter abroad instead of paying dues. The public sector banks and large investors like LIC have to make sure that they follow conservative policies in lending and securing loans given by them. It is always big borrowers who default while small ones either pay or face strong action. So far Adani group has not defaulted in paying instalments which is reassuring.
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