Last week, AdaniWatch reported that participants in a multi-billion-dollar bidding process for the assets of an insolvent bank had complained that the rules were being bent in a way that benefited the Adani Group. The process is now subject to litigation. And a financial commentator has warned in the Times of India that the accommodation of Adani's late bid could result in a 'failed bidding process' that will dent Prime Minister Modi's 'assurances of fairness and transparency for foreign investors'. He also said that Adani's 'mounting debt' and 'highly leveraged' situation is 'worrying', and that the bursting of the Adani bubble 'is very much a possibility'. Surely this is a warning of great pertinence to the State Bank of India as it considers whether to loan the Adani Group a billion dollars for its Carmichael coal mine.
The Adani Group and three other major companies are participating in a formal bidding process for the assets of DHFL, a failed home-loan bank. It is a multi-billion-dollar bidding process. The three other companies have threatened to walk out of the resolution process if a late bid by the Adani Group is accepted, saying that the bid was submitted in violation of the rules laid down by the government.
The controversy has deepened, with Mint reporting that a promoter of DHFL is taking the issue to the National Company Law Tribunal in Mumbai. The report says that the bidding process is stalled until after the tribunal hears the matter on 3 December.
Meanwhile, a commentator in the Times of India has warned that failure of this troubled process will dent the credibility of India amongst international investors. He also issued a scathing assessment of the Adani Group's financial situation and tactics. In a column, the commentator, Dr Muneer, has written that:
'Definitely something is stinking here [in the way the multi-billion-dollar bidding process is being conducted] given that this is paving way for Adani to seal the deal by not breaking any rules. They had also submitted their bid six days post the deadline, which should have disqualified them but was not done for obvious reasons, according to rivals.
'This essentially will result in a failed bidding process with only one player, Adani. That does not augur well for the stakeholders and the public funds and it will affect future foreign capital inflow into stressed assets here...
'There is a merit in this accusation [by one of Adani's rival bidders] and it should thoroughly be investigated given that the creditors are representing public funds and not their personal wealth. Besides, the transparency that was offered to foreign investors must start with this.
'More worrying is what Adani Group is up to with mounting debts and diversification into disparate areas without any strategic alignment. Adani is highly leveraged, likely to get more and more leveraged as it madly extends its footprint across newer and newer sectors. Banks are obviously lending and bank loans are being used to repay other loans. When will the bubble burst? ...
'If the Adani bubble bursts, and it is very much a possibility, a lot of lenders can go down and, with them, a large number of small investors, depositors and public funds that could be used for development and poverty alleviation programs.'
Such warnings should be considered by the State Bank of India in assessing the proposed loan to the Adani Group's Carmichael coal mine in Australia.