hinderburg report, 80,000 crores at stake of banks, SBI’s big statement on loan given to Adani group – sbi on adani loan, said exposure within rbi limits

New Delhi: The report of the American research company firm Hindenburg Report has created panic. Adani Group shares continue to fall heavily. Gautam Adani’s net worth has dropped to $22 billion. His wealth has fallen below $100 billion. Due to the fall in the shares of Adani Group, the difficulties of investors have increased. At the same time, the banks taking loan to the company are also keeping an eye on it. There is a bank loan of 80 thousand crores on Adani Groups. The country’s largest bank State Bank of India has said that it is not currently worried about the loan given to the Adani group. State Bank’s Corporate Banking MD Swaminathan J said that at present there is no such situation due to which we have to worry about the loan given to Adani Group. The loan given to them is within the limits of the Reserve Bank of India. All necessary rules have been followed to secure that loan.

SBI said a big thing on loan

India’s largest lender State Bank of India (SBI) on Friday said its exposure to the Adani group was well below the Reserve Bank of India’s (RBI) large exposure framework and was secured by cash-generating assets. The statement came at a critical juncture in the market slide based on a short selling report by Hindenburg Research, in which the Adani Group has been caught in a whirlwind of Rs 4.18 trillion in market cap in two trading sessions. The report by US-based investment research firm Hindenburg Research alleged that the group was involved in a brazen stock manipulation and accounting fraud scheme.

The group has called the report maliciously mischievous, unsolved. It has said that it is evaluating relevant provisions under US and Indian laws for remedial and punitive action against Hindenburg Research. The Adani group has a debt exposure of about Rs 80,000 crore to Indian banks, which is 38 per cent of the group’s total debt. Swaminathan J. While as a matter of policy we do not comment on individual customers, in the interest of setting the context we would like to clarify that SBI’s exposure to the Adani group is well below the large exposure framework, it said in a statement. SBI is protected by cash generating assets with adequate TRA/escrow mechanism in SBI from all exposures to the group, so debt servicing will not be a challenge.

However, SBI did not comment on the amount of its exposure to the group. A research report from the US has sent shockwaves through the Indian equity markets, everyone is curious what exactly short selling means? A 32,000-word report by US short-seller Hindenburg Research has dumped Rs 4 lakh crore on the portfolio of bulge bracket Adani Bulls, which has been enjoying gravity defying valuations since the Adani Wilmar public issue more or less a year ago. Every word is reducing Rs 12.5 crore from the valuation.

What is short selling?

Simply put, one takes a position by selling a stock or other securities or commodity in the expectation of buying it at a lower price before the time of delivery. Investopedia describes it in the following way – Selling is an investment or trading strategy. that anticipates a fall in the price of a stock or other security. This is an advanced strategy that should only be performed by experienced traders and investors. Traders can use short selling as a form of speculation and investors or portfolio managers can use it as a hedge against the downside risk of a long position in the same security or a related one. Speculation carries substantial risk potential and is an advanced trading method. Hedging is a more general transaction that involves offsetting positions to reduce risk exposure.

Short selling is opening a position by borrowing shares of stock or other assets that the investor believes will decrease in value. The investor then sells these borrowed shares to buyers willing to pay market value. Before returning the borrowed shares, the trader is betting that the price will continue to fall and they can buy the shares at a lower price. The risk of loss on a short sale is theoretically unlimited, as the price of any given asset can climb to infinity.

Taking a contrary view, apex broking and research firm CLSA said it does not see any major downside risk for Indian banks from Adani Group’s exposure, adding that the overall risk appetite for domestic public and private lenders remains within manageable limits .

InGovern Research Services released a note on short selling and shareholder activism on Friday. Hindenburg should be considered as just another market participant as a short seller, who has a motivated approach of issuing a negative report with the aim of driving down the stock price.

1. Short selling is not a new phenomenon in the Indian markets.

2. Short selling is a market mechanism and is not wrong.

3. Short selling is healthy for the Indian capital market.

4. Short selling is an idea on the stock price, it may not work.

5. The activism of the shareholders in the Indian markets should be welcomed.

6. Indian companies should learn to take such reports in their favor.

7. India needs more investor activism.

8. As the Indian market matures, it should get used to these types of active investors taking interest in domestic companies.

9. However, short selling is not shareholder activism.

10. Short sellers are opportunistic and very short term focused. Such activism can be disruptive to management and companies.

11. Short sellers are not held in high regard in global capital markets and even in the US, several short sellers including Hindenburg are under investigation by the SEC and DOJ.

12. Positive shareholder activism like ValueAct Capital’s happens when investors positively engage with management and work towards creating change.

Data in the Hindenburg Report

The Hindenburg Report does not contain any new facts, and at best it is a compilation of all previous allegations made against the Adani Group.

1. Hindenburg has 3 types of data :

a) Easily verifiable data on markup, P/E multiple, debt, shareholding pattern etc. available to all investors.

b) Data points that cannot be easily verified: Mauritian entities etc.

c) Allegations based on past (some more than 20 years), some of which were fully disclosed by the Adani Group as part of various offering documents.

2. Some of the allegations in the Hindenburg Report have been the subject of regulatory investigations in the past.

3. No specific complaint has been made by Hindenburg to SEBI for investigation. SEBI, the Indian securities market regulator, or MCA, acts on specific complaints of large-scale fraud or market manipulation.

Time to release the Hindenburg Report

The strategically timed release of the Hindenburg Report on the eve of the follow-on public offering (FPO) by Adani Enterprises Ltd indicates that there was some purpose to scare investors.

1. However, the Hindenburg Report itself cannot influence FPO share sales.

2. The January 25, 2023 anchor book is already oversubscribed given that many long-term investors will aim to hold the stock for several years.

3. There may be some sentimentality among retail investors when the FPO opens on January 27

valuation and leverage

Although the Hindenburg Report speaks of high valuations and high leverage by the Adani Group, the nature of the industries in which the Adani Group companies operate and the data on debt holdings in Adani Group companies indicate otherwise.

1. Valuation is in the eyes of those who have a position and are willing to bet on it.

2. Nowadays, there are many new age companies with no revenue model and without earnings, Adani shares may look cheap.