Indian policymakers and regulators stepped in at the weekend to calm frayed nerves amid concerns that the turmoil surrounding billionaire Gautam Adani’s conglomerate will spill over into the local economy and affect global investor sentiment towards the country.
While Prime Minister Narendra Modi has yet to comment publicly on the saga, officials from his administration said Indian regulators were independent and competent enough to deal with the fallout.
The Securities and Exchange Board of India said it was committed to ensuring market integrity. The central bank said lenders were within limits on their exposure to the Adani Group.
The market value of Adani’s empire has slumped by almost half since the release of a scathing report by US-based short-seller Hindenburg Research on January 24, accusing it of stock manipulation and accounting fraud.
The group has repeatedly denied Hindenburg’s allegations of corporate wrongdoing and threatened to take legal action.
The tumult has become a national issue, with politicians disrupting parliament to demand answers as Mr Adani’s interests often intertwine with the India’s growth plans.
The main opposition party ramped up the pressure on Mr Modi over his silence and planned a nationwide protest on Monday to highlight the risk to small investors.
Most Adani Group dollar bonds rose on Monday, with Adani Green Energy's 2024 $750 million note leading the advance, climbing 1.2 cents on the dollar to 72.4 cents as of 10.02am in Hong Kong.
Moves on Monday added to last week's gains for several of the group’s debt securities, but prices for the notes are still down by about 8 cents to 23 cents on the dollar since Hindenburg Research’s initial report.
Bankers and industrialists also shared their view on the impact on India.
Asia’s wealthiest financier Uday Kotak said while he did not see systemic risks to India’s financial system from “recent events”, the country’s large corporates relied on global sources for debt and equity financing, and local underwriting and capacity building needed to improve.
Billionaire businessman Anand Mahindra said “never ever bet against India” amid questions if current challenges in the business sector would trip the nation’s ambitions to be a global economic force.
As the saga enters its third week, investors are bracing for further volatility and the focus is increasingly turning to how the Adani Group will manage to finance its debt obligations.
The rout in company shares has cost India its place among the world’s five biggest stock markets, while the rupee is the worst-performing emerging Asian currency this year.
Foreigners have pulled out $3.8 billion from the nation’s equities in 2023, the most among emerging Asian markets. New Delhi is rushing to limit the blow.
Indian regulators “will do their job” in dealing with the allegations against the Adani Group, Finance Minister Nirmala Sitharaman said on Saturday.
The recent market turbulence will not affect the nation’s economic fundamentals, she said.
Trade Minister Piyush Goyal echoed a similar sentiment, saying Indian financial markets were among the most respected and well regulated in the world.
Concerns over how the Adani Group will manage its various debt obligations have increased after Adani Enterprises pulled the plug on a record $2.5 billion follow-on share sale, citing the need to protect its investors’ interests.
It has also shelved a plan to raise as much as 10 billion rupees ($122 million) via its first-ever public sale of bonds, Bloomberg News reported on Saturday, citing sources.
S&P Global Ratings cut its outlook on Adani Ports and SEZ and Adani Electricity Mumbai to negative.
“There is a risk that investor concerns about the group’s governance disclosures are larger than what we have currently factored into ratings,” the rating company said.
There are also risks that new investigations and negative market sentiment may lead to increased cost of capital and reduce funding access for rated entities, it said.
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Favourite book: The Alchemist by Paulo Coelho
Favourite travel destination: Maldives and south of France
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5 of the most-popular Airbnb locations in Dubai
Bobby Grudziecki, chief operating officer of Frank Porter, identifies the five most popular areas in Dubai for those looking to make the most out of their properties and the rates owners can secure:
• Dubai Marina
The Marina and Jumeirah Beach Residence are popular locations, says Mr Grudziecki, due to their closeness to the beach, restaurants and hotels.
Frank Porter’s average Airbnb rent:
One bedroom: Dh482 to Dh739
Two bedroom: Dh627 to Dh960
Three bedroom: Dh721 to Dh1,104
• Downtown
Within walking distance of the Dubai Mall, Burj Khalifa and the famous fountains, this location combines business and leisure. “Sure it’s for tourists,” says Mr Grudziecki. “Though Downtown [still caters to business people] because it’s close to Dubai International Financial Centre."
Frank Porter’s average Airbnb rent:
One bedroom: Dh497 to Dh772
Two bedroom: Dh646 to Dh1,003
Three bedroom: Dh743 to Dh1,154
• City Walk
The rising star of the Dubai property market, this area is lined with pristine sidewalks, boutiques and cafes and close to the new entertainment venue Coca Cola Arena. “Downtown and Marina are pretty much the same prices,” Mr Grudziecki says, “but City Walk is higher.”
Frank Porter’s average Airbnb rent:
One bedroom: Dh524 to Dh809
Two bedroom: Dh682 to Dh1,052
Three bedroom: Dh784 to Dh1,210
• Jumeirah Lake Towers
Dubai Marina’s little brother JLT resides on the other side of Sheikh Zayed road but is still close enough to beachside outlets and attractions. The big selling point for Airbnb renters, however, is that “it’s cheaper than Dubai Marina”, Mr Grudziecki says.
Frank Porter’s average Airbnb rent:
One bedroom: Dh422 to Dh629
Two bedroom: Dh549 to Dh818
Three bedroom: Dh631 to Dh941
• Palm Jumeirah
Palm Jumeirah's proximity to luxury resorts is attractive, especially for big families, says Mr Grudziecki, as Airbnb renters can secure competitive rates on one of the world’s most famous tourist destinations.
Frank Porter’s average Airbnb rent:
One bedroom: Dh503 to Dh770
Two bedroom: Dh654 to Dh1,002
Three bedroom: Dh752 to Dh1,152
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
Director: Laxman Utekar
Cast: Vicky Kaushal, Akshaye Khanna, Diana Penty, Vineet Kumar Singh, Rashmika Mandanna
Rating: 1/5
