Time for Adani to just make the best of this unwanted crisis 

It was a tumultuous 15 days for the Adani group. The group saw market cap eroded by over $100 billion in a span of less than a month. The entire damage was caused by a rather damning report put out by the short seller, Hindenburg

What exactly went wrong?

Even before the Hindenburg report, there have been murmurs about steep valuations accorded to Adani stocks. Some of the P/E ratios were almost out of a fairy tale and there were doubts on how to sustain such valuations. While, the Hindenburg report does not change the narrative, it has raised some major questions. For a group like Adani that has thrived on popular support for its stocks, it would not want to risk a scene where the core of equity value creation by the Adani group comes into question.

Too early to sit on judgement

For starters, Hindenburg made some very damning statements but it is not clear if they can really prove it in the court of law. They are relying on Adani group filing a case in the US courts so that they can rachet up some more mud and hope that Adani would come to the negotiating table, just to avoid further public scrutiny. However, Adani plans to go the whole hog on the legal front. It is not about who is right and who is wrong but more about who is able to prove a point and extract the maximum mileage from this fiasco. That is the question.

For Adani it is time to rethink

The Adani group has several questions to worry about. In capital markets it does not matter who is right and who is wrong. What matters is who the people think is right. It is a game of perceptions and that is the battle that Hindenburg may have taken early points on. Adani will surely want to get its image clear, but there are bigger questions. For a group with so much aggression, does it really have management bandwidth? At a more basic level, has the global fund raising by the Adani group exposed it to global short sellers. These are questions that Adani group will have to debate in the next few days to arrive at an answer but there is more to it. How can Adani leverage the best out of this crisis?

Get the house in order first

That is the broad message for Adani group. They must first get their house in order. Losing $100 billion in market and eroding 50% in just a few days, does not speak too good about the group. It has been too dependent on a handful of institutional investors and it must look to broad-base its ownership matrix. Adani group has been seen as too close to the central government and that has been a kind of double edged sword for them. It has to seriously address the debt levels, the ownership pattern of its capital and ensure it is able to manage the rapid growth mode it has gotten into. This crisis is too valuable to be wasted!