The rapid fall of Indian billionaire Gautam Adani has drawn renewed scrutiny over the tycoon’s close relationship with India’s Prime Minister Narendra Modi.
Puneet Paranjpe | AFP | Getty Images
A chief Asia Pacific economist at Natixis said the fallout from the Adani group turmoil could have political implications for India.
While corporate governance issues affect countries globally, what is different in Adani’s case for India is that it is “highly political,” Alicia Garcia Herrero told CNBC’s “Squawk Box Asia” on Tuesday. .
This is especially true now, she said, since The Supreme Court of the country has started the investigation of Adani Group.Charges of.
Indian billionaire founder Gautam Adani is under scrutiny after allegations the US short-seller firm in January Hindenburg Research In which Adani Group companies were accused of fraud.
Adani Group has denied any wrongdoingBut that didn’t stop the market crash that ended roughly $140 billion in market value from the seven largest listed companies under the group. India’s top industrialist Adani has since lost his crown as the richest man in Asia,
Herrero said investor concerns over Adani’s governance problems would be short-lived.
However, the economist said the long-term political downside for India remains to be seen. Given the close relationship between Adani and the Prime Minister Narendra ModiIt is still unclear, Herrero said, whether the upheaval could hurt the Indian leader politically.
This may complicate the picture India’s G-20 presidency this year,
“I would argue, if things are to be pushed further and there [are] The close relationship, how it goes down with Modi – it can be extremely difficult, given the G-20 and, of course, during the elections,” Herrero said.
He said, “So we need to see because it is kind of beyond the grouping” in terms of “what could be the eventual consequences for India”.
their comments come later The Supreme Court of India last week set up a panel to probe If there were regulatory failures related to the allegations against Adani GroupAfter the Hindenburg Report.
The court order said India’s top court directed the country’s market regulator, the Securities and Exchange Board of India, to investigate “whether any manipulation of stock prices was carried out in violation of existing laws”. SEBI was ordered to complete the probe in two months and file a status report.
Adani’s downfall has been sparked Re-examined his close ties with Modi, Both men are from the western state of Gujarat in India. Adani was an early supporter of Modi’s political aspirations and has been an advocate of Development Vision of the Indian Leader for the country.
Last month, billionaire investor George Soros said Adani turmoil Will greatly weaken Modi’s hold on power and lead to a “democratic resurgence” in the country.
“Modi and business tycoon Adani are close associates; their fortunes are intertwined. Adani Enterprises tried to raise money in the stock market, but failed.” Soros said at the 2023 Munich Security Conference,
“Adani is accused of stock manipulation and his stock collapsed like a house of cards. Modi is silent on the subject, but he will have to answer questions from foreign investors and in Parliament.”
The Adani Group did not respond to CNBC’s request for comment.
Herrero said, noting the political aspects of the Adani case, “we are seeing very different behavior in the investor landscape.” He said that sovereign wealth funds in the Gulf and the US appear to be more in favor of the beleaguered Adani group.
Herrero said, “We have sovereign wealth funds … basically supporting in a way, certainly in the Gulf. And then we have specific investors in the US as we just heard.” She was referring to a recent investment by US-based GQG Partners, which bought shares of the investment for $1.87 billion Of the four Adani portfolio companies.
Rajeev Jain, co-founder and CIO of GQG Partners, which has $92 billion in assets under management as of the end of January, told CNBC that his company was betting on the Adani Group despite the ongoing turmoil.
“Controversy is part of how you get better returns,” Jain told CNBC in an exclusive interview.
Asked about the Supreme Court of India’s order to probe Adani’s business, Jain said the regulatory risk was “low”.
“Professional regulation becomes a risk… nothing is a zero possibility, but I think it makes it less likely for us to invest.”
— CNBC’s Seema Modi contributed to this report