WEBVTT - How to Lose $100 Billion in a Week 0:00:00.280 --> 0:00:02.720 France scene. We are going to start this week unpacking 0:00:02.840 --> 0:00:06.440 this rather epic clash of the titans that's been unfolding 0:00:06.480 --> 0:00:09.000 on financial markets the last few weeks. India's a Danni 0:00:09.039 --> 0:00:11.920 Group says it's exploring legal action against the US short 0:00:11.960 --> 0:00:15.560 seller Hindenburg Research. A billionaire hedge fund manager Bill Ackman 0:00:15.920 --> 0:00:19.799 says he found a Hindenburg Research report alleging fraud and 0:00:19.840 --> 0:00:24.520 manipulation at a Danny highly incredible go to. Amadanni's businesses 0:00:24.520 --> 0:00:27.160 have now lost one eight billion dollars in a week 0:00:27.320 --> 0:00:30.360 after allegations of fraud and stock manipulation leveled by short 0:00:30.360 --> 0:00:34.000 seller Hindenburgh. I mean, really one of the most intriguing 0:00:34.080 --> 0:00:37.280 financial stories of the decade about an Indian business empire 0:00:37.400 --> 0:00:41.000 that had over a hundred billion dollars hundred billion dave 0:00:41.080 --> 0:00:43.599 wiped off its dark market. So it all kicked off. 0:00:43.640 --> 0:00:47.400 On the twenty four January, US activist short seller by 0:00:47.400 --> 0:00:51.839 the name of Hindenburg Research released this bombshell report. Just 0:00:51.920 --> 0:00:55.480 a reminder, you know, an activist short seller bets on 0:00:55.520 --> 0:00:58.280 the prices of assets falling and then they go public 0:00:58.320 --> 0:01:01.120 with their claims to try to act really make that 0:01:01.200 --> 0:01:05.240 happen and it certainly has worked in the case of Hindenburg. 0:01:05.680 --> 0:01:09.560 Now a Donni Group has denied the claims. The Hindenberg 0:01:09.560 --> 0:01:12.880 research basically alleges that the Donna Group companies had engaged 0:01:12.959 --> 0:01:16.920 in decades of brazen stock manipulation and accounting fraud. It's 0:01:16.920 --> 0:01:20.480 also claimed it's companies had a substantial debt which put 0:01:20.520 --> 0:01:23.200 the entire group on a precarious financial footing. Yeah, and 0:01:23.240 --> 0:01:26.479 the actual quote from Hindenburg is quite remarkable, and this 0:01:26.560 --> 0:01:30.360 is a quotation. They've called a Danni the largest con 0:01:30.800 --> 0:01:33.840 in corporate history. And as you said, fran Seeing, of 0:01:33.840 --> 0:01:38.720 course a Dannie vigorously denies those claims. But still investors 0:01:38.720 --> 0:01:41.320 fled and have to say it's a pretty damning report. 0:01:41.880 --> 0:01:44.160 And a Dannie appears at some point a couple of 0:01:44.280 --> 0:01:47.240 days after these allegations in the video posted online to 0:01:47.360 --> 0:01:53.320 reassure investors everything will be fine for me, the invest 0:01:53.320 --> 0:02:00.680 of my investor. It is better amount and everything secondary. 0:02:02.520 --> 0:02:08.880 The fundamentals of our company are very strong. Our balance 0:02:08.960 --> 0:02:17.480 it is healthy and Essex robust. Despite that attempt at reassurance, 0:02:17.520 --> 0:02:19.880 within just a week, the total market value of the 0:02:19.880 --> 0:02:21.880 group of a dining related companies and they've got holdings 0:02:21.880 --> 0:02:24.799 across a whole range of industries from energy to construction 0:02:25.760 --> 0:02:31.320 was wiped up by an enormous amount. I'm David Merritt 0:02:31.480 --> 0:02:33.880 and I'm Francine Laque and this is in the City, 0:02:33.919 --> 0:02:36.480 Bloombergs podcast, connecting you to the stories and the voices 0:02:36.520 --> 0:02:39.160 at the heart of the City of London. This week 0:02:39.200 --> 0:02:42.640 we delve into the wider ramifications of the Danne Hindenberg 0:02:42.639 --> 0:02:45.320 clash nearly a month after the release of the report. 0:02:45.800 --> 0:02:48.680 What's been the fallout for credit markets? What would it 0:02:48.680 --> 0:02:51.680 mean for the investor makeup in the region now and 0:02:51.840 --> 0:02:55.520 in the future, and could this clashed spur a wider 0:02:55.680 --> 0:02:59.840 short seller revival with us shually ran Bloomberg Opinion carmn 0:02:59.840 --> 0:03:03.399 this covering Asian markets and Tree video back to Assalam, 0:03:03.600 --> 0:03:09.000 Global executive editor overseeing global finance investing in legal coverage Tree. 0:03:09.040 --> 0:03:11.600 Could you stop also just by explaining a little bit 0:03:11.639 --> 0:03:15.120 about Adani and who they are and why they're so important. 0:03:15.120 --> 0:03:17.560 I mean, I remember when I worked in Mumbai a 0:03:17.560 --> 0:03:19.400 decade ago. You know, it was a big company, but 0:03:19.440 --> 0:03:22.000 it wasn't as significant as it is now. Tell us 0:03:22.040 --> 0:03:24.600 a little bit about the history of this organization and 0:03:24.720 --> 0:03:28.920 of Danni himself. Adani has burst into sort of the 0:03:29.000 --> 0:03:31.520 consciousness in the past decade. As you say, it's a 0:03:31.600 --> 0:03:33.440 it's a good time for him to look at in 0:03:33.560 --> 0:03:36.880 terms of how you've seen this coming of age, if 0:03:36.920 --> 0:03:39.840 you will, of his empire and his group of companies. 0:03:40.360 --> 0:03:43.920 You know, he was considered one of India's original coll barons. 0:03:43.960 --> 0:03:48.120 So his his DNA very much comes from the commodity side. 0:03:48.400 --> 0:03:51.760 He hails from Gujarat and one of the western states 0:03:51.760 --> 0:03:55.880 in India where the Prime Minister Narendra Modi also hails from. 0:03:56.080 --> 0:03:58.200 And that's a key connection, isn't it. That provenance of 0:03:58.400 --> 0:04:01.240 of Guara and their fates at and slightly entwined they not, 0:04:01.560 --> 0:04:04.800 that's correct. And and in recent years Adani has sort 0:04:04.800 --> 0:04:07.360 of come to be viewed as a proxy in a 0:04:07.400 --> 0:04:11.720 way for this rising India, this emerging India, and he 0:04:11.800 --> 0:04:16.680 has very closely hued to Mody's own vision for you know, 0:04:16.720 --> 0:04:20.039 the ascent of this economy in a in a very 0:04:20.040 --> 0:04:22.559 big way. In recent years. You know, he has also 0:04:22.640 --> 0:04:27.120 branched out into everything from green energy to you know, 0:04:27.200 --> 0:04:31.440 more sustainable ways of doing business in a departure from 0:04:31.480 --> 0:04:35.279 his roots on the commodity side. And and now, of course, 0:04:35.320 --> 0:04:38.719 you know, there was one point before Hindenburg's report became 0:04:38.839 --> 0:04:42.400 public when he was on track to be one of 0:04:42.400 --> 0:04:46.159 the world's richest men. He was Asia's richest man, and 0:04:46.160 --> 0:04:48.440 and he saw all of that sort of coming crashing 0:04:48.480 --> 0:04:52.279 down fairly quickly in the wake of Hindenburg's report. So shurely, 0:04:53.200 --> 0:04:57.359 what is Einenberg accusing Adania? So they are true things, 0:04:57.440 --> 0:05:01.960 but the most important allegation is stock manipulation. According to 0:05:02.040 --> 0:05:06.479 India security security laws, stock has to be listed if 0:05:07.080 --> 0:05:09.720 less than twenty five percent of its total shares are 0:05:09.800 --> 0:05:13.640 free flow basically are now controlled by company insiders. And 0:05:13.680 --> 0:05:16.760 then what Hindenburg was saying was that, you know, like 0:05:16.800 --> 0:05:22.440 the Adone family is using obscure overseas investment vehicles to 0:05:22.560 --> 0:05:25.680 buy into its stocks, and that in effect that they 0:05:25.760 --> 0:05:29.640 control more than seventy of its shares, and that they 0:05:29.760 --> 0:05:33.159 use their controlling power to manipulate the stock prices to 0:05:33.400 --> 0:05:36.480 let them sort by I don't know, two three percent 0:05:36.560 --> 0:05:41.000 a year, And that's the most striking accusation. They also 0:05:41.080 --> 0:05:44.640 talked about into a corporate loans, which is actually pretty 0:05:44.640 --> 0:05:47.880 common among Asian conglomerates. So what it means is that 0:05:48.000 --> 0:05:50.680 if you're a big conglomerate, you use company as cash 0:05:50.680 --> 0:05:53.920 flow to pump into company B. So they also talked 0:05:53.960 --> 0:05:57.600 about a little bit about that. I mean, so this narrative, 0:05:57.640 --> 0:05:59.599 I mean, it's so astonishing if anyone hasn't been following 0:05:59.640 --> 0:06:02.159 this again, anyone listening to this as shre was mentioned, 0:06:02.200 --> 0:06:06.480 the enormous creation of wealth around this company over a decade, 0:06:06.520 --> 0:06:09.760 tracking the rise of Moody and really kind of mirroring 0:06:10.120 --> 0:06:14.200 the emergence of India as an enormous world economy. Then 0:06:14.360 --> 0:06:16.120 to sort of pop and bust like this. Of course, 0:06:16.120 --> 0:06:20.039 the name Hindenburg is named after the famous exploding airship, 0:06:20.120 --> 0:06:22.240 and that's really what's happened here. So not only this 0:06:22.680 --> 0:06:26.080 record creation of wealth, but then the destruction in a 0:06:26.120 --> 0:06:28.080 couple of weeks. I mean it's it was more than 0:06:28.120 --> 0:06:31.880 a hundred billion dollars of value evaporated. How is that 0:06:31.920 --> 0:06:35.920 being seen in India? Sri? Because if Adanni mirrored the 0:06:36.040 --> 0:06:38.520 rise of India, is this attack and this implosion of 0:06:38.560 --> 0:06:41.120 wealth being seen as a real attack on India as 0:06:41.120 --> 0:06:44.960 a whole. Some elements of that narrative have been apparent. 0:06:45.120 --> 0:06:49.440 I mean Adani's own press releases and the statements coming 0:06:49.440 --> 0:06:52.679 out of the company have perceived this as an attack 0:06:52.960 --> 0:06:56.720 on India. There is a sense in those statements that 0:06:56.880 --> 0:06:59.440 he is being unfairly penalized. He has, by the way, 0:07:00.000 --> 0:07:04.000 rejected and refuted all of these allegations, so there's very 0:07:04.040 --> 0:07:07.200 much a sense in in some camps this is a 0:07:07.240 --> 0:07:11.000 short seller with some kind of an agenda to bring 0:07:11.040 --> 0:07:14.360 down the Indian sort of story. But there is a 0:07:14.360 --> 0:07:16.840 counter narrative to that. Over the years, there have been 0:07:16.880 --> 0:07:20.320 several scandals, and you know, I would say compared to 0:07:20.560 --> 0:07:25.760 other investors, it's a sophisticated base of retail investors, and 0:07:25.880 --> 0:07:28.280 I think there is some actual worry playing out. A 0:07:28.320 --> 0:07:31.760 lot of wealth is tied up, not just Adanie's personal wealth, 0:07:31.800 --> 0:07:35.000 but retail wealth is tied up in the Indian stock market, 0:07:35.480 --> 0:07:37.960 So there is a good deal of worry about how 0:07:38.000 --> 0:07:41.600 this might affect personal retail wealth. Shouldly, you've been writing 0:07:41.640 --> 0:07:45.720 a lot about the parallels with ever Grand. This is 0:07:46.320 --> 0:07:51.920 the big Chinese giants that really rippled through global markets. 0:07:52.440 --> 0:07:56.320 Is it worse than ever Grand? I mean, can you 0:07:56.360 --> 0:07:59.800 actually really drop parallels between the two. I'm pretty sure 0:07:59.840 --> 0:08:03.600 we enjoy the parallel. For instance, India's financial regulators have 0:08:03.680 --> 0:08:06.800 been coming out talking about the Indian banking system is 0:08:06.840 --> 0:08:10.680 exposure to Adani and then State Bank of India, access Bank, 0:08:10.760 --> 0:08:12.640 all these state owned banks that are coming out to 0:08:12.680 --> 0:08:15.080 talk about the exposure. And we saw that with ever 0:08:15.120 --> 0:08:18.200 Grand already right, and then ever Grand was seen as 0:08:18.280 --> 0:08:22.480 symbolizing China's financial risks, while Adoni tells the tale of 0:08:22.560 --> 0:08:27.040 an aggressive over alleged over leverage conglomerates with poor corporate governance, 0:08:27.080 --> 0:08:29.560 and people are starting to see that in some other 0:08:29.640 --> 0:08:34.120 Indian conglomerates. Um. But I think in one sense Adani 0:08:34.280 --> 0:08:36.640 is a little bit worse than ever Grant in that 0:08:36.800 --> 0:08:41.600 it has managed to attract very prime blue chip global investors, 0:08:41.800 --> 0:08:44.840 whereas ever Grand. Everyone knows where ever Grand was, and 0:08:44.960 --> 0:08:48.200 the surrounding the Evergrand over the years there was basically 0:08:48.240 --> 0:08:53.240 speculative hedgements and the special situation distress funds. So I 0:08:53.280 --> 0:08:56.520 think it's Adani for our is a big wake up 0:08:56.640 --> 0:09:00.920 call for global investment banks and the blue chip credit funds. 0:09:01.320 --> 0:09:03.280 I think that's really interesting because of course there's a 0:09:03.320 --> 0:09:05.840 retail story for the investor in India and this kind 0:09:05.840 --> 0:09:08.240 of nationalist line, But this company was so big that 0:09:08.320 --> 0:09:10.679 its investors were all around the world, and you've written 0:09:10.679 --> 0:09:13.559 a fascinating piece about how this whole process means their 0:09:13.600 --> 0:09:16.560 investor base is shifting, and we're seeing now in the 0:09:16.640 --> 0:09:20.080 havoc amid those big sell off from the shares, different 0:09:20.080 --> 0:09:22.560 sorts of investors coming in. Can you talk a little 0:09:22.559 --> 0:09:24.760 bit about that and what it means for the company's future. 0:09:25.160 --> 0:09:28.320 Adani is uh in many ways much better than ever 0:09:28.360 --> 0:09:32.000 Ground group in soliciting global funds. I'm just reading off 0:09:32.080 --> 0:09:35.760 Adonne's financial statement. That's what the company said themselves. As 0:09:35.760 --> 0:09:38.880 of March twenty twenty two. Out of its long term debt, 0:09:39.080 --> 0:09:43.240 eighteen percent came from global international banks, thirty seven percent 0:09:43.320 --> 0:09:46.439 came from bounds and most of that is all abounds. 0:09:46.480 --> 0:09:50.080 Also foreign investors. Ever, Grand never had any of that. 0:09:50.440 --> 0:09:54.520 For instance, the global investment banks gave a Danny about 0:09:54.679 --> 0:09:58.280 one point five billion in margin longs that are pledged 0:09:58.280 --> 0:10:04.240 by data backed by Adoni's various stockholdings, and the company 0:10:04.280 --> 0:10:06.760 had to buy back a lot of that. And also 0:10:06.880 --> 0:10:12.000 last year Adoni bark Seems Indian cemented business for or 0:10:12.280 --> 0:10:14.839 for six point five billion U S dollars and then 0:10:14.880 --> 0:10:17.600 the company only came up with one point five billion 0:10:17.760 --> 0:10:20.199 of cash, and the rest of it was to finance 0:10:20.280 --> 0:10:23.760 with bridge loans and mezzollien LANs arranged by global banks 0:10:23.800 --> 0:10:27.840 from like Barclay's to Deutsche Bank to a Sili group. 0:10:27.920 --> 0:10:31.400 So these banks actually have a lot more exposure relatively 0:10:31.440 --> 0:10:35.439 speaking to Adoni than China ever Grand Group surely is 0:10:35.480 --> 0:10:38.120 there something that could be systemic here at this point 0:10:38.280 --> 0:10:40.640 actually pointed out there's you know, it has been easy 0:10:40.679 --> 0:10:44.040 to pinpoint where the pain has been. There are a 0:10:44.080 --> 0:10:46.880 handful of global banks that are caught up here. Now 0:10:47.120 --> 0:10:49.760 the extent of the leverage and the extent of some 0:10:49.880 --> 0:10:53.600 of these margin loans isn't really fully public. And if 0:10:53.720 --> 0:10:57.520 if it does emerge through the course of whatever investigations 0:10:57.559 --> 0:11:00.960 that take place from here on now, or further digging 0:11:01.000 --> 0:11:03.560 from the short seller, that there is more leverage than 0:11:03.600 --> 0:11:06.559 we think there is, it could get larger. You already 0:11:06.600 --> 0:11:10.839 have the likes of MSCI who are contemplating removing these 0:11:10.840 --> 0:11:14.079 companies and the addane companies from its index, and that 0:11:14.120 --> 0:11:16.959 will have a ripple effect around the world. So what 0:11:17.000 --> 0:11:21.080 you're essentially seeing as a multidimensional fallout that's rippled across 0:11:21.120 --> 0:11:23.640 the globe. I mean, it's an enormous amount of money, 0:11:23.679 --> 0:11:26.440 as I said earlier, to evaporate, and I just dive 0:11:26.480 --> 0:11:30.520 a little bit more into this research outfit, Hindenburg. It's 0:11:30.600 --> 0:11:33.839 run by this person called Nathan Anderson. We profiled him 0:11:33.840 --> 0:11:37.000 this week in Bloomberg Business Week. I think one thing 0:11:37.040 --> 0:11:38.240 that occurs to me is, you know, this is an 0:11:38.320 --> 0:11:40.400 enormous company and we've just been talking about investors all 0:11:40.440 --> 0:11:43.120 around the world. Why did nobody has noticed this? If 0:11:43.160 --> 0:11:47.000 this proves correct, his hundred page report makes some very 0:11:47.000 --> 0:11:50.640 serious allegations which have been caused refuted by the company. 0:11:50.679 --> 0:11:52.760 But why does it take a short seller to shine 0:11:52.760 --> 0:11:54.520 a light like this onto our company of this size. 0:11:55.040 --> 0:11:59.320 Many of these allegations have been made before, investigated by 0:12:00.120 --> 0:12:04.400 SEBI and other authorities in India and then subsequently dismissed. 0:12:04.960 --> 0:12:08.440 So it's not like investors weren't aware of some of 0:12:08.480 --> 0:12:11.880 these opaque vehicles that were lurking in the background. There 0:12:11.880 --> 0:12:15.640 have been stories in the press predating the Hindenburg report 0:12:15.760 --> 0:12:18.520 that talk about some of these companies that operate out 0:12:18.520 --> 0:12:22.600 of Mauritius, some of these offshore vehicles. What Hindenberg did 0:12:23.080 --> 0:12:26.840 and by by Hindenberg's own admission in that hundred page report, 0:12:27.000 --> 0:12:29.920 they have been looking into this company for upwards of 0:12:29.960 --> 0:12:33.000 two years at this point. What they did was very 0:12:33.000 --> 0:12:38.000 systematically map out some of these relationships, some of these 0:12:38.040 --> 0:12:41.880 obscure holdings, and juxtaposed it really with how much we 0:12:41.920 --> 0:12:45.360 don't know. You might recall with the case of wire Card, 0:12:45.720 --> 0:12:48.400 for instance, it did take a short seller report to 0:12:48.480 --> 0:12:51.920 not only uncover some of the issues with wire Card, 0:12:51.960 --> 0:12:55.960 but also galvanized German regulators into action. So in a way, 0:12:56.040 --> 0:13:00.000 we're seeing short sellers almost emerge as the auditors. Where 0:13:00.000 --> 0:13:04.720 auditors have failed, the short sellers are coming in and 0:13:04.880 --> 0:13:08.120 doing the auditing work for them in a way right 0:13:08.120 --> 0:13:10.120 for the regulators could remember, I mean the wild Card cases, 0:13:10.240 --> 0:13:12.520 it was amazing if people don't know that this German company, 0:13:12.640 --> 0:13:14.839 and it was actually called up by a journalist as well, 0:13:14.920 --> 0:13:19.080 and the German regulator investigated the journalists at the Financial 0:13:19.120 --> 0:13:22.359 Times rather than the company or accused them of creating 0:13:22.400 --> 0:13:25.120 this rumor. So why the regulators failing here to spot 0:13:25.120 --> 0:13:29.040 things at the short sellers are able to highlight? You know, 0:13:29.120 --> 0:13:30.959 is there a is there a regulatory problem that you 0:13:31.000 --> 0:13:33.840 mentioned Seby have investigated a dine in the past, but 0:13:33.920 --> 0:13:36.200 no one seems to have taken their clearing of the 0:13:36.240 --> 0:13:39.640 company seriously, right, that's right. It does speak to some 0:13:39.720 --> 0:13:45.280 fundamental lack of either its authority that regulators have is 0:13:45.280 --> 0:13:48.280 it resources. In the case of wire Card, you know 0:13:48.440 --> 0:13:51.520 there was, as you say, the regulators were happy enough 0:13:51.559 --> 0:13:56.160 to accuse journalists of market manipulation but actively looked the 0:13:56.200 --> 0:13:58.920 other way. And and the auditors, I mean, I think 0:13:59.000 --> 0:14:02.640 something needs to be at about how strong controls are 0:14:02.760 --> 0:14:05.920 around the auditors, what they look at, whether there are 0:14:05.960 --> 0:14:09.200 disclosures that you know, past muster from the accounting and 0:14:09.200 --> 0:14:12.840 auditing end that really shouldn't. So it does speak to 0:14:12.880 --> 0:14:16.679 the need for a more robust regulatory regime, not just 0:14:16.760 --> 0:14:19.880 in India but just worldwide. Really, surely we're a lot 0:14:19.920 --> 0:14:23.520 of these investors based are they foreign investors or are 0:14:23.520 --> 0:14:27.120 they Indian investors? That's the thing I think, going back 0:14:27.120 --> 0:14:29.800 to the point of why it takes this one short cellar, 0:14:30.040 --> 0:14:33.400 I think the problem with Adani is that if you 0:14:33.560 --> 0:14:36.200 just look at their financing, half of the money came 0:14:36.240 --> 0:14:39.800 from international investors. And I'm sorry to say that, even 0:14:39.840 --> 0:14:42.680 though like those of us saying Asia know about all 0:14:42.720 --> 0:14:45.960 these allegations against a daily over the years, a lot 0:14:46.000 --> 0:14:48.960 of investors based in London and New York. They have 0:14:49.000 --> 0:14:51.520 been sleeping. So it's a sleep of the whale. Some 0:14:51.600 --> 0:14:53.280 of these some of these people and now and now 0:14:53.720 --> 0:14:57.280 now paying the price. Yes, yes, but some of the 0:14:57.280 --> 0:15:00.000 other investors coming in now you write about oak Tree 0:15:00.040 --> 0:15:03.520 Capital Management there and you know, an opportunity to firm 0:15:03.560 --> 0:15:06.600 Davidson Kemal Capital Management. They're seeing an opportunity here, right, 0:15:06.680 --> 0:15:09.560 So is there actually an upside for for investors with 0:15:09.600 --> 0:15:12.880 the right appetite for risk here? Absolutely? I mean they 0:15:12.880 --> 0:15:16.480 are very experienced. Both funds are very experienced in terms 0:15:16.480 --> 0:15:20.400 of y Asians and conglomerates. Auktree very famously sees a 0:15:20.600 --> 0:15:24.560 large product land are of China Evergrand Ever Grand Group 0:15:24.560 --> 0:15:27.600 in Hong Kong. According to my sourcing, they're engaging in 0:15:27.640 --> 0:15:32.040 the lawsuit with the Chinese government over this. That takes 0:15:32.040 --> 0:15:35.000 some That takes some nerve, I think, yes, over over 0:15:35.200 --> 0:15:38.359 uniting our Unit Group, which does a lot of presidente 0:15:38.440 --> 0:15:43.120 in pinks and manufacturing, uh you know campaign. But the 0:15:43.160 --> 0:15:47.560 point is these are very experienced the distressed hedge funds 0:15:47.640 --> 0:15:51.640 who have the appetite and basically the experience to go 0:15:51.720 --> 0:15:54.000 through all of that. Whereas in the past what we 0:15:54.040 --> 0:15:57.640 saw was you know, like some European wealth funds, for instance, 0:15:57.640 --> 0:16:01.080 Norwegians wealth fund and its biggest pension. They basically just 0:16:01.360 --> 0:16:04.280 check the box and say, okay, Adani is doing green energy, 0:16:04.400 --> 0:16:07.600 let's buy into that. They didn't really knock into it. 0:16:08.280 --> 0:16:10.360 Mr Donne is not gonna want these investors on his books, right, 0:16:10.400 --> 0:16:12.000 I mean he's going to try and can you can 0:16:12.000 --> 0:16:14.960 you shape them off? Do you think? Well? I mean 0:16:15.200 --> 0:16:18.440 these investors they probably just were like Adny to buy 0:16:18.440 --> 0:16:21.720 back some bombs, right. They bought those bombs at seventy 0:16:21.800 --> 0:16:25.320 cents a dollar. If Adani just bias for eight or 0:16:25.440 --> 0:16:27.720 ninety cents a dollar, they will be happy to go away. 0:16:27.840 --> 0:16:31.320 And I'm sure Adani family does not want those distressed 0:16:31.360 --> 0:16:34.560 hatch funds out of their back. Actually, we had one 0:16:34.600 --> 0:16:37.240 analysts say that, you know, the Sadani crisis could actually 0:16:37.240 --> 0:16:41.320 derail Moody's economic vision. I mean, that's that's a pretty 0:16:41.320 --> 0:16:44.760 punchy headline. Do you agree? I think so? I Mean 0:16:44.880 --> 0:16:46.840 the way I see a Danny is, you know, the 0:16:46.880 --> 0:16:50.680 whole industrial ambition is the public, private and partnership. Right 0:16:50.880 --> 0:16:54.120 like with China, basically it's all public. The Chinese government 0:16:54.120 --> 0:16:56.640 took on a lot of that um it's uh stay 0:16:56.640 --> 0:16:59.560 owned companies books, whereas in India there is a public 0:16:59.600 --> 0:17:03.400 private partnership. But for for this partnership to work, the 0:17:04.000 --> 0:17:06.240 body and the adonney they have to get along right 0:17:06.520 --> 0:17:09.000 and the adoney cannot fail. And at this point the 0:17:09.040 --> 0:17:11.560 private part is failing a little bit, which makes that 0:17:11.640 --> 0:17:14.840 the next question is how will the Indian government finance 0:17:14.960 --> 0:17:18.560 all this infrastructure ambition. I do think it debils body 0:17:18.600 --> 0:17:20.639 a little bit, if I may jump in there. We 0:17:20.720 --> 0:17:24.800 also had a very good story that moved on how HSBC, 0:17:25.200 --> 0:17:27.879 one of the biggest global banks with a huge footprint 0:17:28.040 --> 0:17:31.720 in UM, China and Hong Kong, is getting pretty big 0:17:31.800 --> 0:17:34.800 on India right now. And so you know, you do 0:17:34.960 --> 0:17:39.040 have to remember though that you know, while some investors 0:17:39.160 --> 0:17:43.200 are looking skeptical about the India story, there are still 0:17:43.280 --> 0:17:46.560 the demographics are good, you know, the growth story. You know, 0:17:46.640 --> 0:17:49.920 some believe, you know, it's still intact. My own senses 0:17:50.000 --> 0:17:52.800 that there will be a turn of some sort where 0:17:52.840 --> 0:17:55.840 you'll see, you know, a more skittish base of investors 0:17:56.440 --> 0:17:58.399 say that this is too much risk for them and 0:17:58.440 --> 0:18:01.440 the due diligence isn't said work. There while in terms 0:18:01.480 --> 0:18:03.919 of how how deeply they have to drill down, you 0:18:03.960 --> 0:18:08.320 may find investors with appetite for risk spot this as 0:18:08.359 --> 0:18:11.879 a bit of an opportunity for them. Yeah, and perhaps 0:18:12.000 --> 0:18:14.439 is this a sign of kind of the maturing Indian 0:18:14.520 --> 0:18:16.760 market in terms of global investors. Know, these sorts of 0:18:16.760 --> 0:18:18.800 things happen all around the world. You mentioned work Card, 0:18:19.000 --> 0:18:23.000 which was a German scandal, many examples of course in 0:18:23.000 --> 0:18:26.240 the United States. So maybe investors around the world you 0:18:26.240 --> 0:18:28.760 mentioned there was maybe a sleep at the wheel people 0:18:28.800 --> 0:18:31.359 now just getting a bit smarter about how to invest 0:18:31.400 --> 0:18:34.639 the Indian market, I think so. I think some of 0:18:34.680 --> 0:18:37.800 it is also they got scared by China, by China's 0:18:38.359 --> 0:18:41.680 drama last year, right, so they decided to flee flee China, 0:18:41.760 --> 0:18:44.160 and then India was a very natural place for them 0:18:44.160 --> 0:18:47.960 to go to. And the but the India assets valuation 0:18:48.000 --> 0:18:50.359 has always been very high, right, But so they're willing 0:18:50.400 --> 0:18:53.800 to overlook a lot of the perhaps negative aspect, likes 0:18:53.840 --> 0:18:57.040 the corporate governance. They just fall into whatever whatever valuation. 0:18:57.160 --> 0:18:59.239 And at this point it's a wake up court. They 0:18:59.280 --> 0:19:01.840 were saying, Okay, we're still looking India, but we need 0:19:01.880 --> 0:19:04.679 to be mindful of all the pay force as well. 0:19:05.480 --> 0:19:08.480 What kind of backlash are we seeing in India. I 0:19:08.560 --> 0:19:11.560 know there's there's been a couple of media company saying, 0:19:11.640 --> 0:19:14.199 look at the humbling of a Dani will be a 0:19:14.280 --> 0:19:17.760 test for the country's capitalism. Does this make or break 0:19:17.840 --> 0:19:21.800 the country? Adani had his own rebuttal upwards of four 0:19:22.240 --> 0:19:26.080 page rebuttal to the Hindenburg report, and I will quote 0:19:26.080 --> 0:19:29.399 from that statement. The statement says, this is not merely 0:19:29.440 --> 0:19:32.959 an unwarranted attack on any specific company, but a calculated 0:19:33.000 --> 0:19:37.000 attack on India, the independence, integrity and quality of Indian 0:19:37.040 --> 0:19:40.880 institutions and the growth story and ambition of India. So 0:19:41.720 --> 0:19:45.640 you're very much seeing this through the lens of nationalism. Um. 0:19:45.680 --> 0:19:48.639 So this is very very deeply wrapped up with that 0:19:48.760 --> 0:19:52.440 sort of rhetoric. At this point, the government itself has 0:19:52.480 --> 0:19:56.639 not said anything about this. They've they've remained somewhat silent. 0:19:56.880 --> 0:20:00.919 The opposition has raised some questions in the Arliament about 0:20:00.960 --> 0:20:05.360 this unfolding affair. So there is a sense though that 0:20:05.600 --> 0:20:08.960 from here on now, especially if the fallout gets worse, 0:20:09.119 --> 0:20:11.440 there is a sense that there's more money to be 0:20:11.880 --> 0:20:15.359 lost here, and there's some sort of undermining of the 0:20:15.800 --> 0:20:19.359 case for India's growth story, you will start to see 0:20:19.600 --> 0:20:21.960 that rhetoric start to change. I guess the question is 0:20:22.160 --> 0:20:25.520 at what point will the Indian regulators as well as 0:20:25.520 --> 0:20:28.760 the Indian government say this is this is enough. We 0:20:28.840 --> 0:20:31.359 need to kind of address this head on should we 0:20:31.400 --> 0:20:33.240 just so to sum it up, putting what do you 0:20:33.280 --> 0:20:37.440 think the exposure of London is to a Donnie either 0:20:37.560 --> 0:20:40.800 through the investor base were also we saw Boris Johnson's 0:20:40.840 --> 0:20:44.160 brother having to resign from a firm that was linked 0:20:44.240 --> 0:20:46.719 to a Donny. So if you look at it, there 0:20:46.720 --> 0:20:50.520 are three ways. So you have the banking exposure, you 0:20:50.600 --> 0:20:55.560 have the investment exposure, and then you have exposure that 0:20:55.680 --> 0:20:59.280 many people who are prominent in the city or move 0:20:59.440 --> 0:21:03.400 in prominent circles may have to the Adorni group of companies. 0:21:04.040 --> 0:21:07.119 On the banking side, I'd say, you know, you have 0:21:07.400 --> 0:21:10.760 Barclays Standard chartered. You know a lot of these banks 0:21:10.760 --> 0:21:13.960 have already been named as banks who have done business 0:21:14.160 --> 0:21:17.760 with Adanni's group of companies in the past. And what 0:21:17.840 --> 0:21:20.560 this is going to test is their appetite to come back. 0:21:20.880 --> 0:21:23.840 We're already seeing some banks say that they don't want 0:21:23.840 --> 0:21:27.360 to be expanding these lending relationships and so I think 0:21:27.359 --> 0:21:29.840 you will start to see many of these banks back 0:21:29.880 --> 0:21:32.920 away from that sort of risk. On the investment side, 0:21:33.240 --> 0:21:36.560 you do see firms like Jupiter, for instance, they came 0:21:36.600 --> 0:21:40.720 back during that share offering that was subsequently withdrawn. So 0:21:40.920 --> 0:21:44.959 there is still appetite among some of these UK institutions 0:21:45.200 --> 0:21:48.080 to invest in some of these securities. When it comes 0:21:48.119 --> 0:21:51.560 to these other entities that are incorporated in the city, 0:21:51.960 --> 0:21:55.720 Joe Johnson stepped down as director of this firm called 0:21:55.920 --> 0:21:59.280 Laura Capital. Not much as known about this firm. It's 0:21:59.520 --> 0:22:04.000 it builds itself as a full service investment bank. It 0:22:04.040 --> 0:22:07.520 has raised funds for several Indian companies. It says that 0:22:07.600 --> 0:22:12.000 it has offices in New York, Singapore, many other locations 0:22:12.040 --> 0:22:16.320 around the world. And you have other personages attached to this, 0:22:16.480 --> 0:22:20.640 including Lord Magna Magna Desai, who is an Indian born 0:22:20.680 --> 0:22:24.720 academic and a former Labor Party politician. He is also 0:22:24.760 --> 0:22:27.000 a director of a Laura So there's a lot more 0:22:27.040 --> 0:22:32.400 connections in time that will surface about who Laura Capital 0:22:32.600 --> 0:22:36.919 is and what exactly the connection is for the entity 0:22:37.240 --> 0:22:42.760 with other Adani companies. Thank you both so much. Thank 0:22:42.800 --> 0:22:48.560 you thanks for listening to this week's in the City 0:22:48.600 --> 0:22:50.639 will be back next week, but in the meantime, if 0:22:50.680 --> 0:22:52.600 you like our show, please head on over to Apple 0:22:52.680 --> 0:22:56.199 Podcasts or wherever you listen to podcasts and rate, review, 0:22:56.240 --> 0:22:59.479 and subscribe. This episode was hosted by me David Merritt's 0:23:00.080 --> 0:23:02.920 me fran sin Laqua, and it was produced by Summersodi. 0:23:03.160 --> 0:23:06.800 Additional editing by Blake Maples and special thanks to Shooty 0:23:06.840 --> 0:23:08.800