aroonwithaview

The best take (by far) I’ve seen on the Adani-Hindenberg fiasco is by NYU’s Aswath Damodaran in his recent blog post. TL;DR – he argues that the main takeaways from this story should be the inherent failings of the Indian business and financial worlds, rather than something specific to Adani or Hindenberg. Indian business is still centered too much around family businesses (reminds of this excellent paper, which argues that Indian business remain unproductive partly because they don’t look beyond the family to hire managers), stock market rules promote bullish sentiment, and banks overwhelmingly prefer to lend to family businesses.

I had watched the rise of Adani stock with mild curiosity in 2022. Its meteoric rise paralleled that of exciting companies like Tesla, and I dug into Adani businesses, trying to understand what innovative disruptions they had come up with, because surely there was no other reason for them to increase in value so much. My takeaway from an hour’s worth of research was that they were doing nothing exciting at all; the Adani empire was captured perfectly by its ports business – portly, eating up too much capital to provide lethargic returns.

And it is this aspect of this story that worries me. India’s capital to labour endowment ratio is severely skewed. When one stale business hogs up whatever little capital (debt and equity) there is to go around, innovative and productive firms starve. There could be no better metaphor for the level of inequality in India, and there could be no better image to keep in mind while reforming India’s business environment.