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India Rising hits a Roadblock: The Short Selling Threat to the Adani Group!
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- čas přidán 28. 07. 2024
- The India Rising Story hit a road block last week, when Hindenburg Research, a short seller, labeled the Adani Group, one of India's largest, fastest-rising and most politically connected family groups, as the "largest con" in corporate history. I have no financial or emotional investment in the Adani Group, and in this session, I start by providing a short history of how a obscure, regional family group company became one of India's largest family group companies, commanding a market capitalization in excess of $200 billion at the start of 2022. I trace its growth in revenues from infrastructure businesses, accompanies by slim profits, huge investments and lots of debt. I try to consolidate the Hindenburg critique of the company into three groupings - that it is committing accounting fraud, that it is manipulating stock prices and that Indian institutions (banks, regulators, LIC) are staying on the sidelines. Rather than call it a "big con", I am inclined to believe that this is a company that is exploiting the seams and weaknesses in the India story, from the obsessive focus on control in many of its family groups to the inertia and indifferences at institutions to misplaced priorities at regulators to the dominance of bullish momentum-based trading in markets. I close with a valuation of Adani Enterprises, the Group's holding company, and find it over valued, even after the mark down in prices last week.
Slides: pages.stern.nyu.edu/~adamodar...
Valuation of Adani: pages.stern.nyu.edu/~adamodar...
Most Indian Traders and mutual funds stay far far away from adani as they have always known the risk
They all knew about it, but apparently did not do anything about it?
This highlights the importance of strong short sellers in a healthy market. The Indian markets are not nearly as tolerant towards short sellers doing their important work, as the professor mentions in the video. Your comment says the Indian traders all knew about Adani, but then they sadly must not have had the power to punish Adani in the markets themselves. Instead, their market apparently needed a foreign short seller to make a fuss about Adani first. I wish the Indian markets could self-regulate away risks like Adani, but currently they depend on foreign interference to get that job done. Their markets continue to mature very rapidly though so there is lots of hope for the future on this.
@@Ljcoleslawwhat are they gonna do about it? Most fund houses are run by nationalized banks which are too scared to make a move against an entity that pretty much has the powers of the central govt at hand . And the smaller independent ones don't have the power or the capital to pull any strings. Plus Idiot retailers all over the world are made to believe that short selling is evil. So they just steer clear instead of taking the risk of a massive backlash.
As an investor, it's important to look at situations like Adani-Hinderburg as a neutral observer untill it's investigated by relevant authorities.
This valuation-centric presentation gives an unbiased & neutral perspective of where things stand today.
Thanks for this. Appreciate it.
obviously Adani is doing fraud with modi
Which investigation has been fair or reached a logical conclusion? Which crook has gone behind bars ?
@@sam7901 Behind bars? For which crime?
i'd start by reading the actual documents instead of hoping for some video on youtube to give you all the answers.
@@Capeau
"some video on CZcams"...
Damn you didn't have to do the Professor so dirty. I think his analysis is fair.
Amazing - you definitely don’t need compliments from the likes of me but this was done wonderfully. The objectivity you show and the complete lack of sugarcoating any of the assessments in either direction is what we need to see from analysts in India to help it reach its potential.
Great work again and you should be applauded for sharing your IP. I think the first slide hits the nail directly on the head with respect to India & the potential of so many emerging markets. “Governments & regulators put their fingers on the scale”. Until EM’s have a stable government (ideally a liberal democracy, rule of law & diverse media opinions) these countries & the people who live in them will sadly fail to realise their potential.
Thanks a lot for this video Aswath. Sheds light on the chaos going in Indian stock market for the last 2 weeks. Good to get clear picture from an expert than the mainstream news that muddies the situation 👍👍
Such a wonderful analysis. Thank you Professor for this video, definitely puts a lot of things in perspective.
Professor..please do the valuation of LIC of India..will be fascinating to listen to your perspective
Thank you Professor for your wonderful thesis on ADANI group. It is always enlightening to hear from you. Stay blessed always 🙏
This lesson in analysing is extremely interesting, neutral and objective. What I liked most, is the remark about watching from the sidelines and see what systemic changes take place in India. Use of shell companies by Indian family companies have always had a money laundering more than tax objective (which is the case for US entities looking to Bahamas or Cayman). Having worked with some, who have been implicated in other recent scandals -intercompany transactions have generously masked the weakness in the books. And weak auditing puts it under the rugs.
I enjoy that you create timely and topical videos on big stories in the news like this. Thanks as always professor! 👍
Thank you for taking the time to do this analysis. I look forward to more Professor.
I like the cynicism when he said Indians can congratulate themselves for making Adani the second richest man. 😊😅. Many of them go paycheck to paycheck and here there is one man gobbled up most of society’s money. What an equality
45% Americans live paycheck to paycheck. Haven't you known this? Indians can certainly congratulate themselves on the homegrown billionaires. Why not?
Pl open a company and provide employment. No one stopped one becoming a capitalist
@@supadrasta The point here was not made about America living paycheck to pay check but about India. why do you have to compare the 2 always. and even if you are comparing lets look at the wealth equality in India the richest 1% holds 58% of the nations wealth compared to the US the richest 1% owns just 38%. And with that being said to make investments (as a retail investor) you need disposable income. And the average investor in adani has lost over 10 lakh crore over the past 10 days in hopes of being part of the india growth story. And just a side note: patriotism is a terrible reason to invest or even to rationalize an investment. the next thing you know a company which is patriotic can then scam and dupe investors of money just because it was 'aligning' with the 'indian' goal. Growth needs to be organic, and a company the size of adani needs to have reputable management and make clear and distinct lines between gamily holdings, political establishment, and be above reproach. No one in their rational mind can even rationalize the price/share of adani enterprise stock pre Hindenburg. Many small journalists, retail investors questioned in and were put behind bars. growth is a compliment of being bullish and bearish. you need someone to keep companies in check. This Hindenburg vs adani fiasco will help Indian regulators and companies to be more careful in their dealings and allow them to be more favorable for FII's in the future.
in china the richest 10% hold 70 % of its wealth ..these income gaps will always remain ..the job of the government ia to close these gaps ..amusing that even after 5 plus decades in power the old govt could not close this ..the incumbent with 8 years has embarked upon many noticeable programs to close this ..free ration, housing , water , insurance etc ..
@@manojchittayil3326 thats not job of govt. No one stopped you of becoming an entrepreneur
One of best unbiased analysis I have heard so far on the Adani vs Hindenburg story, @ashwat sir, I think you must step up your game and come out more in public to share your analysis. I been watching your videos for a while, and I think your wealth of knowledge and control over emotions during these analysis is commendable and we need more of this in the public domain vs someone just trying to throw shit on the wall and hoping that it sticks.. it's unfortunate that your this video has reached only couple thousand views while some pseudo analysts who don't even know the fundamentals are gaining millions of views just to gain publicity.
Amazing in depth and objective review
For this first time I was able to differentiate the signal from all the noise
Thank you for sharing your time and expertise on these real world analysis’s. Please continue!!
An absolute critical explanation.. I was waiting for your intrinsic valuation of adani group to determine the extent to which the company is overvalued. A very critical,unbiased and independent viewpoint not taking sides either of hindenburg or adani.
Beautifully explained with data points without any fear or favour. Thanks for your insights.
First Report have just read accidentally. Very nicely summed up the last few sentences. You have a very beautiful point. Shall go through more of your stuffs available online . Thank you for posting this . ❤
Sir please tell us about your life story , how you started your career from india to new york, please do make a video on your life learnings
guys like my comment if you wanna know about Aswath sir's life story
Yessssssss
Appreciate your deep dive on adani family business. You are an impartial and informed us whatever exist in numbers. Continue your good work professor. Really gifted to be in your era . Btw i am following your courses as well.
Thank you Prof. You have been very fair and balanced. The noise on both sides of the spectrum is messy. That said, I do wonder what legal recourse does Adani have incase the allegations from HR are shown as malicious short selling techniques.....
Your channel is a goldmine I recently discovered. Please keep up this work.
Dear Sir,
Must say it is a fantastic analysis. We'll appreciated your efforts. Does helped to build perspective on investing as a retail investor
Great work professor, i enjoyed the content, and the dig on ESG was my favourite slide. One point where i beg to differ is I dont think only 2% of the company is owned by retail investors. Many retail investors are (maybe unknowingly) exposed (maybe overexposed?) to the Adani group through institutions like their banks and LIC. So i understand the regulators incentive to protect the shareholders. Just my 2c
Thank you professor
An objective view on the company was something I needed badly
Wow, wow and wow! What a thorough analysis it is without thumping the chest of thé credibility. How on earth I haven’t come across this legend. Thank you
Thank alot Sir. Appreciating deeply your approach towards assertiveness of which level of con game is been played by Adani and what kind of hyperbole level Hedenburg intended to play.😊
One correction professor. Adani never constructed an airport. It acquired fully constructed and operational airports through Govt intervention.
Bravo ! You caught it. I thought about the same and asked the same question. Y Y Y
I am from lucknow and see new airport development, maybe you are not aware of the ground reality or consciously choose to look the other way. Approximately 10,000cr investment in the Lucknow airport alone!!
Even Navi Mumbai airport is still under construction by Adani group.
This is just what anyone on the sidelines wants to hear. This level of conciseness and an actual judgement call. Thank you professor.
Well balanced comments. Balanced and objective review without the emotions.
Content like this is the reason fractions of the community have an unbiased, objective view of the happenings
Thank you veryuch for such a lucid narration of complex financials
One of the best presentation that made me to learn lot. It is worth spending time and watching each slide with necessary pauses to understand evaluation thoroughly. Thank you very much for providing VALUE insights, well researched information, unbiased assessment and your precious time to decode the report as an independent observer. This is also an eye opener to investors in India. Banks in India should wakeup now as a minimum to minimize risks to protect investors and public money
The best description I have come across about this issue . Thanks lot sir for all the efforts
Thanks for the objectivity and the clarity!
Brilliant Prof. Need such analysis to have a Clear View on Valuation dis passionately
Good one Prof...objective analysis with wealth of information and guided opinion
Some valid points mentioned. but this still begs the question, if the float % is low for public to invest, and retail investors make up a small % of the outstanding shares, then who were the parties that sold the stock (evident from trading volume post Hindenburg report). In addition the 947 INR/share price will only be supported if investors sell enough to drive the price down. from the looks of it the only ones who would sell would be retail, and banks. Assuming Mauritius entities are indirectly controlled by Vinod Adani.
I’d add one more question -> who benefits from the rising stock price? If Adani is intent on control he won’t sell his shares so his gains are just notional. Does it affect his cost of debt in anyway? Is he using the equity as collateral for debt to buy more shares?
@@rexiioper6920 yes ofcourse. It has been stated multiple times in the analysis and in general public information also that adani is borrowing by keeping shares as collateral. So driving prices high increases his borrowing power.
@@rexiioper6920 from my understanding I believe that was what one of the allegation from Hindenburg was about. It essentially said that rising stock prices were used to take out greater lines of credit/loan with those shares as collateral. Note: not just adani enterprises stock but all 7 group companies.
One potential aspect not covered is the possible future dividend from its investments (if those investments get to cash surplus after its investments). Not sure how much this may add though.
Thank you very much professor for your presenting your valuable view on this
7:42 Sir
1)Adani power was listed on 21 August 2009
2) Adani port was listed was listed on 30 November 2007
and they spin off transmission in 2015 and Adani green in 2018
Very useful session and highly apt points on the ESG. I still have question.
How can we short the debt funds, expect a fall in Share value and give us profit in the debt shorts. I mean, Debt short has no meaning if the debts are honoured by internal accurals !!. With almost no free float in stock , we cannot short stock too much. So what are they shorting (Stock or debt bond ) ? and More important "how are they shorting?
Thank you, might I ask for some whole India's market growth story analysis?
Thank you for yet another great piece of work Mr. Damodaran
Sir. Thankyou for using slides to explain the Adani issue in an unbiased manner. Slides have made it very easy to follow your explanation.
Sir i follow your videos and interview and i am very thankful that you help people by sharing those knowledge which is very hard to come to common people like me. Being an engineer and not having much knowledge in finance background, always wanted to learn how people value a business and i get to learn this from you .... Aap mere guruji hai aapko mera shastang Pranaam 🙏🙏🙏
A excellent analysis as always. I was having trouble in analyzing Adani Enterprises as they seem to be more like a holding company whose segments keep on changing every few years.
Do you think you can your excel sheet of this valuation.
? . Thanking you as always
It looks like it’s linked in the description
Finally a sane, logical analysis away from all the noise! Than you Prof Damodaran!
Sir,
Thank you so much for a detailed analysis
As Always, great presentation. The best unbiased view. Thank You Professor for the knowledge provided. 🙏
Great impartial analysis ! Thank you
Lovely and useful as always Prof Sir
Well awaited Analysis… high quality insights
Thank you Sir. Every line that you said in this video was a learning for me.
I'm glad I came across your youtube channel!
Was just waiting for this to come out.
Thank you professor for this insightful video.
Just one point on the stock price manipulation, even though the market cap was more than $200 billion at one point, the free float market capitalization of the adani group companies were way way less, making manipulation possible with relatively lesser volumes.
The price of land in India is fixed by the government and when we go to buy land, its price is 3 times higher.
Can we call it land owner price manipulation
Precisely.. Easy to pump up when one entity controls 75% or more, and there is no supply. And it wouldn't require a particularly large volume of trading..
I would be afraid to short Adani because of all the corruption. You might never get a fair price.
@@Jordan-Ramses It's one stock most are not comfortable holding or shorting
@@eskrishnaram4782 It's very risky. But maybe the payoff is worth these kind of gambles. There is certain type of bias against low odds. People like to bet on the likely outcome even when the return doesn't make sense. Getting a 5 percent profit for a 20 percent loss chance is not a good bet. But people do that.
Really great share sir 👍 thanks a lot for this knowledgable video 🙏
Great Video. Great Insights!
Thanks for an objective, thoughtful assessment without the hysteria. Hindenburg has shown a harsh light on "promoter" lead Indian companies at large. Most Indian investors know of all their intercompany dealings, it is a way of life, but for Americans especially it is shocking. Big disconnect in corporate governance in India and the developed world, let's hope Hindenburg is a life-changing catalyst. I stay well clear of these family conglomerates, even the relatively well-regarded ones- it's all relative.
Dear Sir, I like so so much of your content. Before watching any video First I put like, then only watch.
Thank you Sir for posting this
This was a great lecture. Very good points.
glad to be here ♥️♥️🔥🔥
Thorough, insightful and balanced analysis. Thanks for sharing
Great analysis... One more point to add though... True that LIC is the biggest institutional investor in the group, but what is more revealing is the lack of Mutual Fund investments in the stock. Adani Enterprises is a Nifty 50 stock yet it is almost unowned by institutions...
Hence one should not buy it, and a Discount of 30% of the fair value is a minimum before even looking at the stock.
That is unless you are sick of crypto and want to try gambling on equities that are as volatile... Moon pumps and all
As usual Impressive and we'll researched
Watching from Bangladesh. Very deep move!
I'm glad to have watched the video by Dr. Damodharan filled with financial wisdom
Excellent sir. High quality information explained.
Thank you professor for the insightful assessment.
I'm grateful to learn from you sir thanks a lot for this valuable session ✨🙏🙏🙏🙏🙏
Hello sir, excellent analysis. The Best and fact based analysis on Adani saga. I have a question, As you have seen, the momentum of adani stocks started hyperbolic in 2020/21, which is very relevant. Can this be attributed to just momentum trading? What's your hypothesis on this? Can you do session elaborating what might have happened? Is it just tracking PE? This will help retail investors to make a more learned decision to avoid such pit falls.
Potentially lazy investment decision making by FIIs. Check out his interview with Karan Thapar
Thank you for the insight
Good analysis. Thanks for sharing
I just love you Sir. Full respect true Guru. Wish it was true for me. More power to you
Thank you professor for the thorough and unbiased analysis. Love your work
INDA India's largest etf has 6 Adani holdings. Total weight about 3.5% of the index. Thank you!
Thank you prof for such a detailed analysis. Excellent choice of words
Regarding earnings manipulation: low profit margins would be their goldilocks zone. If they'd report too high margins and profits, creditors might ask "why aren't you reinvesting?" Low margins in a healthy business might be the carrot they need to get more creditors on board. They might actually have negative margins in a lot of their businesses and an unhealthy business as a whole which they hide by cooking the books.
And if it were a high margins business, then there would be too much competition, all of the VCs entered into the market. Its a good slow and steady monopoly business with predictable cash flows.
Yes..
Also they stay low in margins becoz they need to bring the politicians money in the system . Make the long term asset for them . Just a thought !!
Hoo, how smart, professor should be taking lectures from you
Couldn't have asked for more clarity
Wonderful analysis Mr Damodaran
Thank you for this analysis!
can someone please explain ESG, slightly more and Green bonds?
Dear Sir,
1. Liked the analysis of how concentrated funds may not be able to push up the market cap for such high market cap companies
2. However ESG issue is something which I guess where they are playing to the audience
3 just needed to understand how is investment rate declining in YR 6-10 and what is growth of terminal cash flow - these IMHO may be inflating cash flows
Thanks for this very objective analysis
You should also highlight how fundamentally flawed the US dollar system is as also how that is the biggest threat to the world.. from a financial pov. Would be so interesting to see.
Brilliant analysis. Thank you
Insightful.
Thankyou for sharing.🙂
Sir please describe the future of Tata power as the compitition of it like Adani transmission, Adani Power and Adani green energy are collapsing.
Please guide us
Well balanced and forthright analysis
Good Analysis Dr. Besides what someone can think, stock market doesn't work based on opinions or rationale, it's a drunkards walk. There are shorts and short squeezes.
Nice analysis... Good work... Love it
Sir, can the terminal g be taken @ 4.59%? Seems too high!!
Thank you Professor!
Both the Sensex and Nifty rose at a faster clip during the Manmohan Singh period than it has done since in CAGR terms.
Thank you professor!
Thank you professor.
thank you for this video
Best video tht cuts thru the noise on TV!!