Wednesday, February 22, 2023

Adani Story 3: My earlier comments on leverage and an update from Forbes

In Adani Story 2, posted on February 15, I wrote "What if the security is created in a round about way that does not fall within the mischief of pledge reporting? What if accommodation entries help in reducing the year-end loan figure? Thus, it is not inconceivable that the total system leverage (company + promoter) is more than the numbers floating around."  

These thoughts were earlier shared with participants from SBI Mutual Fund at the National Institute of Securities Market (NISM) on February 10.

Forbes has now disclosed that Pinnacle Trade and Investment Pte. Lte., a Singapore company indirectly controlled by Vinod Adani (Gautam Adani's brother), had in 2020 entered into a loan agreement with Russia’s state-owned VTB Bank (which was sanctioned by US last year due to Ukraine war). By April 2021, Pinnacle had borrowed $263 million and lent out $258 million to an unnamed related party. Later that year, Pinnacle offered two investment funds — Afro Asia Trade and Investments Limited and Worldwide Emerging Market Holding Limited — as guarantors for the loan... Both Afro Asia Trade and Worldwide are large Adani Group shareholders. Together, the two funds hold $4 billion (as of February 16 market prices) of stock in Adani Enterprises, Adani Transmission, Adani Ports, and Adani Power, all of which acknowledge the funds as 'promoter' entities. Neither fund has disclosed share pledges in Indian financial filings for the four Adani companies they’re invested in.

It is clear that there is layer after layer of leverage.  Like in an onion, peel off one layer and the next layer is visible.  Peeling onions makes you cry.  Investors in Adani group stocks are already crying.  Wonder who will be next.