Largest con in corporate history? Or Punt?

Edition 82

Happy Sunday,

As the Adani empire implodes, I’m reminded of another time and place around 2 decades ago when I was investigating the balance sheets of a respected and powerful Indian conglomerate. That story of corporate fraud kicked off a journalism career! Despite threatening behaviour by a handful during the investigation, it was still a time when you could broadly count on civility and the rule of law in India. Most importantly, the conglomerate itself managed to get its act together and clean house.

But this is 2023 and India is a very different place. The country’s ‘national champion’ in business, the Adani group was accused last week of engaging in “brazen stock manipulation and accounting fraud.” The no holds barred report by U.S. short seller Hindenburg Research says it all “Adani Group: How The World’s 3rd Richest Man Is Pulling The Largest Con In Corporate History”. Read the report here

(Who is Gautam Adani and what is Hindenburg Research you ask? Read more at the Washington Post)

Why it matters?

Not only is the Adani group critical to India’s infrastructure upgrades, global pension funds, investment funds, energy companies like Total all have huge exposures to the group too. Then there are the actual Infrastructure projects ranging from the biggest in India to Bangladesh, Indonesia, the middle east, Africa and Australia. While the $288 billion infrastructure and commodities conglomerate has vociferously denied Hindenburg’s accusations, it’s still seen $100 billion wiped off its market capitalisation in days. It is pretty obvious what a short seller gains from this - but the contents of Hindenburg’s report raise a much bigger question. One about a country’s perception on the global economic stage!

Hindenburg Research in its report has managed to circumvent the couched diplomatic language of India’s journalists, who have previously investigated the rise of Gautam Adani and his empire. Journalists who have been well aware of the proximity of the 3rd richest man in the world (not anymore of course after the stock Wipeout!), and the Prime Minister of the world’s biggest democracy. Read a Journalistic History of the Adani Group at The Wire

How the Adani group and its close ally, the Modi government handle themselves going forward is going to define how India is seen as a global economic player. Will the country be able to show it is governed by strong institutions, or will it become a country known for a nexus that backs kleptocracy? Until that becomes clear, global capital markets may just remain closed for the Adani group, with other Indian corporate giants put under a diligence microscope. Read more at the FT

The women who’ll define Adani & India Inc’s future

India Inc’s future on the global stage is going to come down to the actions of two women.

Photo courtesy: Prasar Bharati News service. (L) Nirmala Sitharaman, Finance Minister, India (R) Madhabi Puri Buch, Chairman, Sebi

The Watchdog

Madhabi Puri Buch - She became the head/chair of Sebi (the Securities and Exchange Board of India) in February last year. Sebi is the regulator in charge of overseeing the country’s $3.3-trillion stock market. Read more about her background at Forbes

On her appointment much ado was made about Madhabi being the first woman, and the first person from the private sector, and the youngest ever chair to head the securities market watchdog. She was also no newbie to the job. A graduate of the prestigious Indian Institute of Management (IIM-Ahmedabad) she spent 4 years as a whole-time member (WTM) of Sebi - that’s the job just below the chair’s, before taking the top job.

Till now, the only comment she has made on the crisis rocking the markets and the fallout of Adani’s share crash has been a text message to the FT on Thursday:

“We never comment on any company specific matter . . . directly or indirectly.”

The market watchdog and Madhabi are going to find themselves under intense scrutiny as they navigate the question - what to do about the Adani group? Eyebrows were already raised when Gautam Adani made two back-to-back visits to Madhabi’s offices just months after she took up her role. It was considered highly unusual even before Hindenburg’s red flags. Read more at the Hindu Business Line

Fiscal policy boss

The other woman who is already at the centre of the drama as it inevitably unfolds is India’s finance minister, Nirmala Sitharaman (no relation!) Read more about her background at Business Standard

India’s first female finance minister since Indira Gandhi took up the job in 2019, and also heads the corporate affairs ministry. Previously she was the country’s defence minister. And in another life worked in London at the BBC. A Bharatiya Janata Party (BJP) politician since 2008, Nirmala is a trusted lieutenant of PM Modi's.

As the Adani crisis broke, Nirmala was in the throes of India’s most important political day of the year - Budget Day. Despite trying to put the focus back on tax measures and critical investments she was aware that investors are now watching closely for any governmental bailouts, but was firm in her belief the crisis was not going to materially impact India’s global position.

"It'll be regulators who'll do their job. RBI made statement, prior to that banks, LIC came out & told about their exposure (to Adani group). Regulators independent of govt, they're left to themselves to do what is appropriate so market is well regulated. So the regulators will do their jobs."
"One instance, however much talked about globally, I would think is not going to be indicative of how well Indian financial markets have been governed." Read more at the Economic Times

News to know

Politics

• Article 41.2 in Ireland’s constitution dates back to 1937. Even if you’re Irish, you’d be forgiven for not having a clue what it pertained to. But trust me, if you’re an Irish woman, you know. This is the part of the Irish constitution that says ‘domestic chores are a woman’s life and duties.
  
  It’s a law that triggering enough for driving a movement toward legal equality by activists and campaigners. The country’s coalition government has finally committed to holding a referendum to legally change a clause that puts Irish women’s place firmly in the home. But that commitment to hold a referendum hasn’t yet stretched to a firm date. So, what’s this totally inappropriate, discriminatory and sexist clause?

“The state recognises that by her life within the home, woman gives to the state a support without which the common good cannot be achieved,” It adds that the state will “endeavour to ensure that mothers shall not be obliged by economic necessity to engage in labour to the neglect of their duties in the home”. Read more in the FT

• The war in Ukraine’s had some unintended consequences. One of them may impact Danish women. Denmark’s women may soon have compulsory military conscription as the country is setting in place plans to boost the size of its armed forces. Last week the country’s defence minister and deputy Prime Minister Jakob Ellemann-Jensen claimed the plan to extend compulsory military conscription to women could help the country meet its requirements under its NATO membership. More at TV2 in Dutch or on Bloomberg in English.

• Ah secularism. Is it a guise for anti-religious sentiments, racism or exactly what it says on the box? Québécois need to figure out what they mean by it and quick. 

  
  Amira Elghawab’s appointment as special representative on combatting Islamophobia by Canada’s PM Justin Trudeau has caused an uproar, but neither is backing down to Quebec Premier François Legault and federal Bloc Québécois Leader Yves-François Blanchet who want her removed and, in Mr. Blanchet’s case, the position abolished entirely as he made clear in the National Assembly this week.

  
  What’s got his knickers in a twist about the appointment of the human-rights advocate and journalist? A sentence in a 2019 opinion piece she co-authored with former Canadian Jewish Congress CEO Bernie Farber which Mr. Blanchet and his supports claim contains anti- Quebec bias. The piece opposed Quebec’s secularism law, Bill 21. Read more at The Globe and Mail & more on Bill 21 at CCLA

Business

• The government of Japan and its central bank, the Bank of Japan seems set to underscore that diversity isn’t part of its DNA and neither is gender equality. The government’s nominations for heading the BoJ doesn’t have a single woman contending for the post of governor (which renews this spring). Competence is definitely not the reason, considering two of the world’s most powerful central banks are run by women (Janet Yellen when she was at the U.S. Fed and Christine Lagarde at the ECB).
  
  What perhaps we can take as a small win though is — one of the two of the deputy governor positions may just be filled by a woman. But even this isn’t a given, considering the current Japanese PM isn’t a fan of women in the workplace, has only two women in his 20-strong Cabinet and in parliament, the latest Lower House steering committee has no women at all. Read more at Japan Times

• To be a woman on a board is no easy task. A research study of 43 women directors on U.S. publicly traded company boards found 6 gendered participation tactics that women use to manage in male-dominated contexts. These seemingly mitigate stereotypical concerns for women to appear warm and/or competent on boards. The 6 tactics are: asking, connecting, asserting, qualifying, waiting, and checking. Read more in the Harvard Business Review

• A new channel launched last week in the United States and claims to be the ‘First Asian American and Woman Owned TV Network in American history.’ Founder and CEO of Chime TV is Philippines born Faith Bautista. Read the Press Release

• Vice Chair of the board of L’Oréal Francoise Bettencourt Meyers is now the world’s richest woman, and the 13th richest person if you disregard her gender. With an estimated net worth of around €66 billion she is worth around the same as 1/3rd of France’s tourism industry, pre-Covid. Read more at Euronews

• Kim Kardashian’s crypto fiasco may have opened up an ugly can of worms, but regulators seem to be quick to the mark, this time around. The UK’s Financial Conduct Authority has significantly increased its interventions on ‘fin-fluencers.’ It said that so-called fin-fluencers, individuals who use online platforms such as TikTok and Facebook to market financial products, were a “growing concern” and cited unregulated advice and the targeting of students in its report. 

Tellingly, in 2022 the FCA instructed financial firms to either amend or withdraw a record 8,582 social media promotions. That is a mammoth jump from 573 in 2021 and 207 in 2020. Alerts issued by the regulator about unauthorised businesses and individuals also jumped by 34% year-on-year to 1,882 in 2022. Read more at The Times 

Sports

• The headlines are calling it the motherhood penalty. France’s Clarisse Cremer recently gave birth to her first child and was promptly and controversially dropped by her sponsor Banque Populaire ahead of the 2024 Vendée Globe.
  
  IMOCA skipper Clarisse currently holds the record for being the fastest woman to sail solo around the world, raced for Banque Populaire in the last Vendée Globe, and was due to take the helm of the former Apivia for them in the 2024 race. In what’s become a PR disaster for the bank, they’ve responded by claiming race officials refused to make allowances in new rules being introduced to take women and maternity into account. Read more at Yachting World

• There’s a new breakout star in the World of women’s ice hockey and she is only 14 years old. She also doesn’t come from the traditional ice hockey behemoths Canada or the U.S. Meet Slovakia’s sensational forward, Nela Lopušanová who became MVP — of the 2023 U18 women’s world championship in Östersund, Sweden this month. Read more at The Athletic

• It is resoundingly South Africa's moment to shine in women’s cricket - well for this week anyway! In the final T20 tri-series match in the UK, and ahead of hosting the Women's T20 World Cup - South Africa delivered a blistering half century from Chloe Tryon which gave them a 5-wicket win against India. Read more at BBC

Society

• Sally Azar has become the first female Palestinian pastor in the Holy Land after she was ordained in a Lutheran Church ceremony in Jerusalem. Sally will head the English-speaking congregation at the Church of the Redeemer. Read more at Al Jazeera

Health

• About 85 percent of women experience menopausal symptoms. From hot flashes, sleeplessness, pain during sex. There’s an established treatment for it, so NYT columnist Susan Dominus asks - why aren’t more women offered it? Read her column at NYT
  
  Susan quotes Rebecca Thurston, a professor of psychiatry at the University of Pittsburgh in her article and her opinion about women’s health truly resonated with me. Rebecca studies menopause and believes menopausal women have been underserved — an oversight that she considers one of the great blind spots of medicine.

  ‘‘It suggests that we have a high cultural tolerance for women’s suffering,’’ Thurston says. ‘‘It’s not regarded as important.’’