Adani scrambles to reassure investors

This is an audio transcript of the FT News Briefing podcast episode: ‘Adani scrambles to reassure investors’

Marc Filippino
Good morning from the Financial Times. Today is Wednesday, February 8th, and this is your FT News Briefing.

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The death toll in Turkey and Syria keeps rising after a massive earthquake. Federal Reserve chair Jay Powell made his first comment since that unexpected jobs report. And India’s Adani Group is trying to reassure investors that the company is OK despite recent bombshell allegations. I’m Marc Filippino and here’s the news you need to start your day.

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Fed chair Powell yesterday warned that the US central bank might have to raise rates more than investors expect. He said that’s because it’ll probably take a, quote, “significant period of time to tame inflation given stronger labour market data”. His comments were the first since Friday’s employment report showed an unexpected jump in job growth. Now the pace of inflation has been slowing, but Powell said the road to lowering inflation was probably going to be bumpy. The S&P 500 was up and down and back up again while Powell was talking yesterday and ultimately settled a little more than 1 per cent higher.

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Turkey’s president Recep Tayyip Erdoğan yesterday declared a state of emergency in areas hit by a massive earthquake.

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That video shows an 11- or 12-storey apartment building in a snowy city just collapsing, the dust puffing up from the foundation.

Adam Samson
The destruction is just absolutely enormous and it’s affecting a really vast area both in Turkey and in Syria.

Marc Filippino
That’s the FT’s Adam Samson. He’s in Ankara, covering the earthquake. So far, more than 7,000 people have died in the two countries. Rescue efforts are intense, but also hampered by logistics and bad weather.

Adam Samson
And the general impression is that there’s lots of people on the ground. More than 10,000 people trying to help the government, bringing like more than 10,000 tents, mattresses, beds, that sort of thing. But it’s really just not enough. One of the really, really big problems here is that the conditions are, in the first place are just really bad. A lot of roads buckled as a result of the earthquake. On top of that, there’s snow in a lot of areas, freezing temperatures. So the roads are just really, really difficult. So it’s difficult to get aid to people. And in fact, a lot of aid workers are sort of getting stuck at major regional airport hubs. So it’s definitely one of the key bottlenecks that they’re facing.

Marc Filippino
The destruction to buildings is also eye-popping like the video we heard earlier.

Adam Samson
You know, there’s a lot of criticism about the building standards in Turkey generally, but in this part of the country in particular, people have been talking for ages about how a big earthquake in this region could topple buildings and cause a real problem. And this is exactly what’s happened. And I think that’s gonna be really important for the political story. You know, why didn’t they improve building standards sooner? Why did they, you know, allow for this kind of construction in an area that’s extremely prone to earthquakes?

Marc Filippino
That’s the FT’s Adam Samson in Ankara.

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The Adani Group is trying to shore up investor confidence after a huge sell-off of shares in its listed companies. A New York short-selling firm called Hindenburg Research sparked the retreat last month with an explosive report. It accused the Indian conglomerate of fraud, stock manipulation and excessive debt. This week, one of Adani’s flagship companies said it would pay off about $600mn in debt.

John Reed
So they are taking steps to sort of reassure the market that they’re in decent shape.

Marc Filippino
That’s our South Asia bureau chief, John Reed. He says a big reason why the report landed like a bombshell is that the Adani group is crucial to India’s economy.

John Reed
That’s involved in ports and transport and infrastructure and data centres, and recently bought the most serious TV station NDTV. It’s kind of an old-school conglomerate and the company that the state leans very heavily on to meet India’s considerable needs for building infrastructure. They’re also blazing a trail for India abroad, and indeed last week, as all of this crisis and drama was unfolding, signed off on a final deal to take over the port in Haifa in northern Israel.

Marc Filippino
So, John, is the Indian government or any regulators doing anything? Are they under pressure to do anything about this?

John Reed
They’re under pressure. I wouldn’t call it mass pressure, but India’s small political opposition have been trying to bring up questions about Adani and the implications for taxpayers. It’s a political issue because there’s state-owned groups, the State Bank of India and Life Insurance Company of India, both of which are state-owned, are exposed to Adani companies. And they’re also asking questions about the relationship between the prime minister Narendra Modi and Gautam Adani, given that they are perceived as allies, have a relationship that stretches back to when they were both rising in their respective fields of business and politics in Gujarat. Indians are now asking the question or have been asking the question for a long time of whether there is anything improper in their relationship. Both men, of course, have denied this.

Marc Filippino
So, John, like we said, this report came out. There was the sell-off in shares of Adani companies. They’ve lost like $100bn in market value. Are investors nervous about other Indian companies? Are there signs that this has shaken foreign investors’ confidence in India in general?

John Reed
I certainly haven’t seen any. And if there is any, I think it’ll take a while to sink in. These things don’t happen overnight. And certainly corporate investors watch their words in regards to India. It’s a very big and proud sovereign nation that pays close attention to what you say about it, whether you’re a journalist or a corporate executive or an investment bank. I haven’t read or heard that much commentary of people saying this will sink investor confidence in India. And indeed, I’m not yet certain myself that it will. Most of the allegations still need to be uncovered and proved to the extent possible, prosecuted or through the justice system here or elsewhere, examined by securities investigators in India as appropriate.

Marc Filippino
So if I’m getting this right, at the moment, you’re saying that there’s been a financial hit to the Adani Group, that Gautam Adani has had his personal fortune hit, but the impact has stayed relatively contained, that it hasn’t really rippled out to the broader Indian economy.

John Reed
I think it’s more symbolic than a real knock for the Indian economy. This is the year when India is taking the presidency of the G20 group of leading economies. It’s the year when it becomes the world’s most populous nation, when, you know, India is gonna be hosting, you know, world leaders at a summit here and, you know, is trying to show off its achievements to the world. And the timing is also significant because Modi’s government faces an election next year. On current trends, it looks like its BJP party will comfortably win a third term. But again, this is certainly not a welcome development.

Marc Filippino
John Reed is our South Asia bureau chief.

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Before we go, Germany’s discount grocers have eaten into Britain’s grocery market sector. And competition with a big British rival has become bitter. Tesco launched a promotion for its Clubcard using a logo that has a blue square with a yellow circle in it — very similar to the store logo of German rival Lidl. So Lidl sued Tesco claiming infringement, passing off and copyright violation. Yesterday, Tesco’s lawyer said, quote, “There’s no significant similarity.” Guess the logos’ likeness will be in the eye of the court.

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You can read more on all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.