World's Third Richest Man

The Adani Ascendency Phenomenon

Jawaharlal Nehru consciously avoided being seen close to any of the large business houses of his times. In their ingeniousness, those houses successfully found their way through the labyrinth of the much feared and despised Indian bureaucracy and political establishment. The bureaucracy’s vice-like grip over economic administration remained unchanged for a good number of decades since Independence. At the same time, a few brave hearts, determined to make it big despite the infamous licence Raj and the concomitant bureaucratic cobwebs, managed to get into the inner court of the country’s third Prime Minister Indira Gandhi (1966 till October 31 1984, except for 1977-1980).

In Mrs Gandhi’s personal secretary and confidante extraordinaire RK Dhawan, wielding enormous power, three business men in particular – one from Bombay (Mumbai renaming hadn’t happened then) and two from Calcutta (since renamed Kolkata), found a friend who wouldn’t stop doing anything for them.

What was not ordinarily possible till Dr Manmohan Singh, under the prime ministership of Narasimha Rao rolled out a series of economic reforms, necessitated by a grave economic crisis, Dhawan would ensure that nothing would come in the way of securing for his three loyal friends what they wanted. Many would expectedly take exception to the favours thus extended selectively. At the same time, if the three were not enabled to overcome the hold that the then industry leading groups had on private sector economic activities, the country would not be experiencing some extraordinary entrepreneurship marvels of present times.

The worst thing that the industry leaders did in the licence Raj was to deny the possibility of aspiring businessmen to enter some industries by pre-empting licences all of which they would never implement. Business men cosying up to politicians and bureaucrats is not, however, unique to India. It happens everywhere with powerful lobbies working in developed countries on behalf of businesses. Civic society will frown on the practice and media will take note from time to time when limits are crossed and distribution of favours become disturbingly so.

Corporate governance in India was an unknown phenomenon almost till the end of last century. And till the non-resident Indian industrialist Swraj Paul (earned peerage in the UK since) made infructuous attempts to buy into two Delhi based groups – Escorts and the diversified DCM – in the early 1980s, people in general were not aware that in majority of cases families with equity holding of less than 10 per cent stayed in full control of companies. Abuses naturally followed with impunity. Today provoked or on occasions without provocation, the seemingly uninterested politician Rahul Gandhi will invoke two groups Reliance and Adani for amassing great wealth helped by their proximity to Prime Minister Narendra Modi. It will not be anybody’s case that proximity to the powers that be doesn’t help in running businesses. Great risk taking capacity, foresight, execution of very large projects without time and cost escalation, ability to get into sunrise sectors ahead of others and capacity to hire the best talents and empower them count a lot more than connection with people in power.

It will not be out of place to recall here that once when Pranab Mukherjee was told by a party colleague in a somewhat disapproving tone that the Ambanis always got favoured treatment from him, his retort was “get me any number like them, I can assure you I shall extend them the same kind of courtesy.” Once again the message that came out from that unofficial conversation is that knowing people in right places is no guarantee for success in business.

Let’s take the case of the Birla family, which once had free access to Mahatma Gandhi then all through with the ruling political establishment and also the principal opposition parties. In spite of that proximity, it is only one branch of the family headed by Kumar Mangalam Birla that counts today. Businesses of a number of leading groups of the past have either shrank in size beyond recognition or just withered away, thereby underlining the point political patronage is no guarantee of success. Consider several information technology companies, including TCS, Infosys, Wipro and HCL Technologies acquiring global status without any government help or the over a century old Tata Group with presence in automobile to steel to retail reinventing itself to greater glories.

ALSO READ: Family Business And Succession Plan

The country will never be short of people who will always see the presence of an invisible hand (in the present case distribution of patronage by the government) in the meteoric rise of Adani Group. Such vigilance, if it is informed is good for the economy and general public who responding to sustained campaign by official agencies make investment in the equity market either directly or through mutual funds. Investors find reassurance when promoters themselves have substantial holdings in companies. As said earlier, Indian promoters per se managed to exercise total control over companies by pegging their ownership of equity capital as little as possible till the late 1980s. In that kind of environment, promoters enjoyed running companies putting all risk on banks, financial institutions and general investors. But shaken by Swraj Paul episode and in order stave off takeover attempts, all Indian business men started raising holdings in their promoted companies.

What about Gautam Adani, who starting with trading in commodities in the late 1980s made big strides in infrastructure (roads, airports, seaports), energy (both coal fired and renewable) and electricity transmission, gas distribution, mining, FMCG and real estate? Bombay Stock Exchange says promoter holdings in Adani group companies are like this: the flagship Adani Enterprises 72.28 per cent; Adani Ports & SEZ 66.02 per cent, Adani Power 74.97 per cent, Adani Transmission 73.87 per cent; Adani Green Energy 60.5 per cent, Adani Total Gas 74.8 per cent and in the recently listed Adani Wilmar 89.74 per cent.

Remarkably all Adani group company shares are doing very well with their prices continuing to appreciate a lot more than progress of BSE and NSE indexes. A report published the other day by CreditSights, a Fitch arm saying Adani group is “deeply overleveraged” as it is predominantly using debts to invest aggressively across its existing as well as new businesses. Giving a warning, the report says: “In the worst case scenario, overly ambitious debt-funded growth plans could eventually spiral into a massive debt trap, and possibly culminate into a distressed situation or default of one or more group companies.” No doubt many horizontally fast expanding groups here and elsewhere have run into debt traps from where they could never come out. At the same time, there are quite a few examples in India, more importantly the Tata Group and Reliance Industries, both not very long ago carrying the burden of debt mountains, have been able to achieve comfortable debt equity ratio through sustained improvements in cash flow and EBITDA (earnings before interest, tax, depreciation and amortisation.) After having recorded profitable growth of its mobile telephony and data delivery and retail businesses and also announced massive plans for development of green energy and hydrogen, the outlook for Reliance improved so much that Mukesh Ambani could sell small parcels of equity at substantial premium to global giants such as GIC of Singapore, TPG of the US and Aramco of Saudi Arabia. The funds thus mobilised are used both to pare debts and further grow business.

The Economic Times, which saw Adani reply to CreditSights on its describing the group as “deeply overleveraged”, says in a report: “The group’s net debt was ₹1.6 lakh crore by the end of the June quarter this fiscal year, compared with ₹50,200 crore of run-rate EBITDA. Leverage as measured by gross debt to EBITDA ratio was at 3.92x, reflecting a drop in the debt level, Adani group said. The group’s gross debt was ₹1.8 lakh crore.” Whatever Adani may say, funding this scorching rate of growth through greenfield ventures and acquisition of the kind Swiss giant Holcim’s cement business in India for $10.5 billion – in one giant stroke Adani becomes the country’s second largest cement maker after Birla’s Ultratech – will remain a subject of concern.

The other day Gautam Adani made a startling announcement that his group will be building the country’s largest single location alumina refinery of annual capacity of 4 million tonnes in Odisha. (Alumina is an intermediate chemical derived from bauxite mineral used in smelters to make aluminium) The selection of Odisha is natural, for the eastern state owns over half the country’s bauxite deposits of 3.9 billion tonnes. No doubt before he commissions the refinery, he will use bauxite mines in the upstream and build a large smelter in the downstream. There is a point here. Odisha is a non-BJP state and is long under the rule of Biju Janata Dal (BJD). Chief Minister Naveen Patnaik is educated, cultured and suave.

So if anyone’s thesis is that ascendency of Gautam Adani to the extent of becoming Asia’s richest and the world’s third wealthiest is because of his proximity to Modi, then she/he is short on understanding the economics of how business is run. Adani exercising the option provided in the loan agreement that at any point that loan can be converted into equity at face value of share making the way for his acquisition of marquee television channel NDTV no doubt raises the prospect of the channel undergoing change in character of content. But the acquisition cannot be challenged. The watchdog SEBI has not found anything wrong in Adani move.

Independent Journalists Explains NDTV Deal

Change In Ownership Hardly Impacts A Media Group’s Core Ethics

Arun Singh, a Lucknow-based independent journalist, transfer of partial holdings in NDTV poses no threat to the channel or its journalists if they act as professionals

The recent brouhaha over Gautam Adani making a hostile bid to take over NDTV and thereby undermining media freedom, appears a little overplayed. I would call it premature over-reaction. The matter is very simple: NDTV took a loan from the VCPL about a decade ago which it was not able to repay. Seeing some business advantage, the Adani group buys VCPL and gets its holding in NDTV as the new owner! That’s it!

Now if this takeover or the deal is being propagated as an attempt to stop the company and its journalists from carrying on with their ‘revolutionary’ journalism or to prevent them from criticizing the government, then it is laughable.

By and large, the media in the country can broadly be distinguished under two categories: First, those who sell themselves (nowadays termed as ‘Godi Media’) and those who sell news (the term for them is ‘anti-establishment media’). Most media houses are owned by private business groups or, in a few cases, by political parties. The top leadership frames a set of rules and the workforce, in this case journalists, follow these.

For any professional media group to prosper, it is necessary they present news and facts on the basis of the core principles of journalism. Else, they are likely to fall into one of the two categories mentioned above. To my mind, while it is unprofessional to present only the good works of the Government of the day to curry benefits, it is also questionable to report only the negatives of a ‘strong’ and democratically elected government. Your credentials will be in question if you follow a set, premeditated agenda in presentation of news.

ALSO READ: The Reason Why Indian Media Is ‘Pliable’

A professional journalist will never compromise with ethics. And if a journalist is not comfortable with a group’s policy or structure, he or she has the option to look for work opportunities elsewhere. In any case, change of ownership has hardly ever changed a company’s policy dramatically. The clientele and viewership, as the market forces for corporate world, decide how a media group moves forward as a credible news supplier.

As far as this deal is concerned, it is not at all going to hamper anyone’s bread and butter or revolutionize journalism to the next level. I repeat, it is just another deal between two corporate houses and if one thinks (like it has been propagated on social media about freedom) that journalists will not be able to carry on with their distinct line of thought, one is fooling oneself.

As told to Rajat Rai

Weekly Update: Adani Busts Modi’s Claims On Farm Laws; Justice Chandrachud’s Sermon

Prophetically, PM Modiji assured farmers that they had nothing to worry as selling in the open market would fetch higher prices for them than the meagre MSP. Modiji has undergone quite a metamorphosis in his premiership, changing from a savvy fashion icon with multi-lakh suits to a simple Yogi. Perhaps in his new incarnation in office he might have developed talents of a ‘seer’. But even the best Yogis get it wrong at times. This time pesky Adani has done exactly opposite of what Modiji predicted.

In Himachal, farmers decided to give the new deal a chance. Apple growers went to Adani Agrifresh Ltd to sell their stock. Adanis and Ambanis were going to be the new saviours of farmers, able in theory to give them twice the price of those state run Mandis and MSPs.

As it turned out, Adani offered them some ₹12 to ₹72 for a Kg of apples depending on their ‘happy’ colour, meaning quality and how red they were. Quick calculations on their fingers showed farmers that after calculating travel costs, input costs etc, they were in fact subsidising the apple free market. Usually it is the Government that subsidises farmers.

Several turned to the good old state run Agriculture Produce Market Committees (APMCs). Not surprisingly they were offered more, between ₹90 to ₹125 per Kg. Even the so called illiterate farmer, as Modi Government had suggested farmers don’t understand economics, worked out that ₹90 offered by APMC for the lowest quality apple is much higher than ₹72 offered by the capitalist Adani for the best quality Apples. It became a bit of no brainer for farmers to work out where to sell their apples, the state sector or the free market.

To rub salt into Modiji’s wounds, Adani’s apples sell for ₹250 per Kg after a bit of shiny plastic or other packing. A hefty 300% profit. It doesn’t seem after this, the farmers protest is going to go away in a hurry as nice old Adani has just proven them right. He just proved their fear that the freemarket will drive down the prices instead of enriching farmers. Perhaps, Modiji’s Yogi stage of life will come handy somewhere else.

Justice Chandrachud Foils Own Truth To Power Sermon

Justice Chandrachud is becoming a bit of a star celebrity among the liberal minded Indians. He has been making the right sounds, giving the impression that he is willing to uphold the law against any Government trying to do a bit of ‘bendy mendy’ with the Constitution. Perhaps he wants to make a name in the historical hallways of Supreme Court to stand shoulder to shoulder with the likes of Bhagwati and Iyer. However after unravelling his latest speech, it is obvious that there is a bit of a way to go before joining legends like Iyer and Bhagwati.

Justice Chandrachud has boldly advised his fellow countrymen, ‘to speak truth to power’. “Democracy and truth go hand in hand. Democracy needs truth to survive,” Chandrachud spoke with conviction.

He suggested that speaking out has been a privilege of upper castes so far and told all citizens of India to enjoy the freedom to express their opinion. Suggesting “women, Dalits and members of other marginalised communities have an important role to play in this context”, he said. “Since they did not enjoy the freedom to express their opinion, their thoughts were confined, crippled and caged. After abolition of the British Raj, the truth became the belief and opinion of upper-caste men.”

Perhaps he was subtly alluding to the Government when he said at the virtual event totalitarian governments are associated with a “constant reliance on falsehoods” and it is the duty of citizens to strengthen public institutions and expose the “lies of the State”.

Great words, one might say. But when the common man hears of journalists being slapped with ‘sedition’ charges after saying something unflattering about Modiji or the Bhakts and others speaking their version of truths such as Government has failed the people during the pandemic being thrown into jails, the esteemed Judge’s rally cry sounds a bit hollow. Where is the rickshaw-wallah going to get courage to ‘speak truth to power’ is a mystery which Justice Chandrachud might also want to solve.

Of course His Lordship can introduce suo moto cases in the SC and order dropping of all charges against those who ‘spoke truth to power’. But that hasn’t happened so far,

However, he gave an example, where a ‘clever’ citizen might sense the fear even in their Lordships rhetorical posturing. The Justice started, “It can’t be said that State will not indulge in falsehood for political reasons even in democracies”. An original statement of discovery if ever.

Now he is an Indian Judge extoling his average non elitist fellow citizens to “speak truth to power”. For empathy in the statement, one would think that he would have picked an example in Indian post 1947 history that most could relate to, such as the fabricated reasons on the 1984 attack on Golden Temple, the statements of Congress leaders after 1984 Delhi massacres, or the report after Gujrat riots or numerous other examples of explanations given by Indian politicians after riots, massacres, corruption scandals and a lot more that everyone knew were creative tales. These events are close to home and examples that the citizens can relate with. They are examples that citizens could feel should not have happened.

Their Lordship said this instead, “The role of US in the Vietnam War did not see the daylight until the Pentagon papers were published. In context of Covid, we see that there is an increasing trend of countries across the world trying to manipulate data. Hence, one cannot only rely on the state to determine the truth.”

How many Indians know of the ‘Pentagon’ papers in far off land, the USA! Or was the Justice playing it safe while firing his fellow citizens to stand up to politicians?

The Vietnam example is a bit naff. The politicians responsible for that war are dead and long gone. So no problem in ‘exposing the lies of Vietnam’ and still being invited to top legal tables in America. Even if he wanted to avoid the wrath of his own government and deflect away from home, he could have had cited the CIA report on Russian meddling in American elections when Trump was helped but Trump and Senate denied. Now that would have been the Justice standing by what he is preaching. Otherwise ‘speaking truth to power’ is just another fad and fashionable comment these days and Indians cannot be seen to be left out of what is trending around the world.

But if citizens did take his message to heart and start ‘speaking truth to power’, there will be millions of sedition or related charges. Politicians and lies are synonymous in the mind of most Indians. Currently it takes a few decades to get a hearing at the courts. Then it might take centuries if people take his advice.