Roving Periscope: Post-BBC and Adani episodes, investors relook at India’s robust growth story
Virendra Pandit
New Delhi: The geopolitical manipulators’ attempts to force India to join the western camp ahead of the ongoing Russian invasion of Ukraine entering its second year on February 24—the BBC’s sponsored purported ‘documentary’ against Prime Minister Narendra Modi and the Hindenburg Research recycling old Adani records, in the public domain for years, tried to pressure New Delhi to go West—has run its course within a few days as global investors realize their panicked overreaction to the Indian story.
This investors’ rethink of India’s robust growth story manifested a day after Finance Minister Nirmala Sitharaman presented the far-sighted Budget for 2023-23. However, a hugely divided Opposition is still trying to score some brownie points in Parliament and outside.
That the two-pronged attack on India had limited impact is emerging now.
For example, Apple CEO Tim Cook said on Thursday he is “very bullish” on India as he described the South Asian country as a major focus and a “hugely exciting market” where the technology giant is putting a significant amount of energy through investments, retail, and online presence, the media reported on Friday.
“We actually did fairly well through Covid-19 in India. And I’m even more bullish now on the other side of it. And that’s the reason why we’re investing there. We’re bringing retail, the online store, and putting a significant amount of energy there. I’m very bullish on India,” Cook said at an earnings call after Apple reported financial results for its fiscal 2023 first quarter ended December 31, 2022.
Responding to another question on Apple’s strides in India, Cook said looking at the business in India, “we set a quarterly revenue record and grew very strong double digits year-over-year.
“And so we feel very good about how we performed, and that was — that’s despite the headwinds that we’ve talked about,” Cook said, adding that taking a step back, “India is a hugely exciting market for us and is a major focus. We brought the online store there in 2020. We will soon bring Apple retail there.”
Global credit rating agency Fitch Ratings also said there is no immediate impact on the ratings it has assigned to Adani entities and their securities following a “short-seller report” alleging malpractices at the group. No material changes are expected to its forecast cash flow.
There are also no major near-term offshore bond maturities. The earliest maturity is in June 2024 for Adani Ports and Special Economic Zone Ltd. This will be followed by the maturity of instruments in December 2024 for Adani Green Energy Limited Restricted Group 1. Then there are maturities in 2026 and beyond for all other entities, reducing refinancing risks and near-term liquidity risks.
In a statement, Fitch said that ongoing monitoring will be looking closely at major changes to the rated entities’ access to financing or cost of financing on a long-term basis, unfavorable regulatory/legal developments, or ESG-related matters that could affect credit profiles.
At present, Fitch has ratings on eight entities/restricted groups within the Adani fold, including Adani Transmission, Adani Electricity Mumbai Ltd, APSEZ; Adani International Container Terminal, Adani Transmission Restricted Group 1; Adani Green Energy Restricted Group 2 and Mumbai International Airport Limited (MIAL).
Clearly, after initial knee-jerk reactions, global investors are having a relook at the India success story where the Adani Group touches the lives of millions through its outreach into sectors like ports, power plants, coal mines, edible oil, and more.
The fact that even after a USD 108 billion crisis, Adani moved swiftly on Wednesday to call off an FPO worth USD 2.5 billion (Rs. 20,000 crore), despite full subscription, and promised to refund their money to restore their confidence. His bonds also rallied on Friday as all 15 dollar securities of the Group advanced, partly helped by reports that the Adani Ports and Special Economic Zone Ltd (APSEZL) had made coupon payments on schedule.
Realizing that his assets outweigh his liabilities, the Adani backers include Citigroup Inc., Credit Suisse Group AG, and Barclays Plc, which are pursuing options to curb the risk of losses, including asking for more collateral and halting the use of Adani company securities to cover margin loans to wealthy clients. Many continue to view India as a buffer to growth in China, whose economy has plummeted.
“To be sure, there’s no indication that Adani companies are facing a liquidity crunch,” the media reported on Friday.
According to reports, Adani is also in talks with creditors to prepay some loans backed by pledged shares as he seeks to restore market confidence. Goldman Sachs Group Inc. and JPMorgan Chase & Co. have told clients that bonds related to the Adani businesses can offer value.
Adani showcased his Group’s extensive local and international bank relationships in a 413-page rebuttal to the Hindenburg short-sellers allegations, which he rightly called “a calculated attack on India.”
Meanwhile, UBS Group AG Chief Executive Officer Ralph Hamers said the bank’s exposure to the meltdown isn’t a matter of concern for the Swiss bank.
“I wouldn’t worry about it,” he told Bloomberg this week.
After the Reserve Bank of India (RBI) asked lenders for details of their exposure to the Adani companies, SBI Chairman Dinesh Khara said the largest lender’s loans to the Adani Group are backed by cash-generating assets and overseas exposure is “nominal.” The lender has given loans of USD 2.6 billion to companies in the Adani conglomerate, or about half of what is allowed under the rules.
Another Indian lender, IDFC First Bank, also said on Thursday it is “comfortable” with its ties to Adani. Its outstanding funded exposure represents just 0.06% of the bank’s funded assets, while non-funded outstanding is 0.51%, and it is receiving payments on schedule.
Not for nothing has Adani repeatedly denied the allegations, called the short-sellers report “bogus,” and threatened legal action.
