Mumbai: Developing countries do need entrepreneurs for the development of the nation. Many a times a collective efforts from the multiple businessmen help the country to progress. But is it safe for the country if only one businessman is allotted almost all the government contracts, including military equipment maintenance ones? Yes, Indian government has been granting almost all the major contracts to #Adanigroup. Now since the financial irregularities are pointed out by an international investment research firm, Hindenburg, the question becomes more pertinent.
In 2017 #NathanAnderson started a short selling company, #Hindenburg, a #ForensicFinancialResearchCompany, which analyses equity, credit and derivatives of companies across the world. It focusses on a ‘#ManMadeDisaster’ in the companies. So far Hindenburg has exposed financial irregularities in 16 companies across world which includes financial irregularities in #Twitter. And now it has reported that #IndianBillionaire #GautamAdani’s conglomerate of companies have made profits by artificially inflating the share prices. A reputed organization called #HindenburgResearch has prepared a 33000 page report on the Adani Group.
One of the topmost Finance and #StockMarketAnalyst, #AjayRaigadkar, has revealed/assumed the steps taken by Adani group of Companies. With modesty he has stated that his report may have some lacunae. He states that initially a company floats an IPO. An #IPO means that at least 25% of your company’s shares are exchanged in the market and the value of that exchange determines the value of the entire company. In step 2, transfer the proceeds from the IPO to your or someone else’s company account in a country with low/zero interest rates like #Mauritius or #CaymanIslands. That is, the company pays nothing in the form of tax to the government.
Then in Step 3, the #TaxFreeMoney is Used in a Couple of Ways.
a) Create new companies in the same country and divert this money and buy IPO shares of own companies in India. Or
b) Give some of this money to the mutual fund companies of that country and ask them to invest only in particular companies. Normally mutual funds invest in at least 20-30 companies but these 5 funds have bought shares of Adani’s company only.
By this stage too many shares are bought by these fake companies. Artificial scarcity of Adani shares is created and then the share price automatically starts increasing. That rising price trend is created and once it happens and then traders also jump into this flowing trade.
Any trader has a fund that he will not sell any shares until the share price falls to a certain level, so in this stage the simple task of the Adani is to not let the share price fall below that certain price (below support). And once it happens the price of the share increases and keeps on increasing so the big guys like #LIC and #IndianMutualFunds also have to jump in this crowd. They have unlimited money, they keep buying the shares at whatever price they are available and then there is an explosion of the share prices. That’s how Adani shares grow 10-20+ times in a year. In this phase Adani does nothing to the share price because by now the trend is formed, the share price is increasing in the channel. At this time Adani then shows this inflated share price and starts taking loans by pledging the share, loans of lakhs of crores.
With this loan money he buys government companies, land ports, airports. He buys all the things he wants to sell and the stock market keeps increasing the price of the shares considering these things as a big win for the business. And then Adani, who could barely fit in India’s top 100, gets a place in the top 5 richest people in the world on the increased share price, on the government bank loan, on the strength of the shares taken by the government entity LIC at a very high price.
What next from here? Nothing can be predicted but it can happen here as it happened in almost all Scams in the world. Someone who is already rich will become richer, poor will become poorer, some banks who gave huge loan on pledge of shares will go bankrupt due to falling price of shares. In big banks like #SBI this will create #NPAs and to sink those NPAs #Petrol and #Diesel prices will be increased thus inflation going up.
Under #AatmanirbharBharatAdaniDefenceSystemsAndTechnologiesLtd (#ADSTL) said that it will acquire #MRO operator Air Works for an enterprise value of ₹400 crore. The company, in a statement, said it has signed definitive agreements to acquire #AirWorks, which has developed extensive operational capabilities within the country for key defence and aerospace platforms. Air works has a presence across 27 cities with six maintenance bays. Air Works and Boeing are currently undertaking heavy maintenance checks on three P-8I long-range maritime patrol and anti-submarine warfare aircraft operated by the Indian Navy at Air Works facility.
Since Adani Group of Companies being under the cloud of suspicion, shouldn’t this defence related contract be cancelled? Also how safe it is to allow a single group of companies to cater to Nation’s defence? Reportedly drugs found at Adani port become talcum powder as well as one of the relatives of Mr Adani, Mr Vikram Kothari is embroiled in ₹5000 cr Scam.
#AdaniGroupOfCompanies, #Narendramodi, #PMModi, #RBI, #SEBI
