NYU's 'Dean of Valuation' says Adani Group exploited 'weakest links' in Indian institutions

The Adani Group didn't play a "con game" but has exploited the "weakest links" successful India's institutions to its advantage, according to NYU's "Dean of Valuation" Aswath Damodaran.

The concern prof astatine the Stern schoolhouse of concern said fundamentals "never travel into play" for Indian markets.

"Nobody wants to speech fundamentals, cipher wants to beryllium bearish astir a institution and accidental that banal looks overpriced. It's not steadfast for a market," Damodaran, told CNBC's "Streets Sign Asia" connected Thursday.

"That's wherefore I said Adani is not astir the institution … this is astir the weakest links successful the India story. And from my perspective, this is not a con game. This is conscionable a institution that's played those weaknesses."

Damodaran's remarks are an hold of his caller blog post, wherever helium shared his views connected the ongoing Adani affair. 

On Jan. 24, U.S. based short-seller steadfast Hindenburg released a report accusing Indian billionaire Gautam Adani of pulling the "largest con successful firm history," and alleged the conglomerate has engaged successful banal manipulation and fraud.

The Adani Group firmly denied the accusations, calling it a "calculated onslaught connected India" and its institutions.

Even though the Adani conglomerate spans ports, airports, mining, cement, powerfulness companies, Damodaran said helium believed the Group's halfway concern is successful infrastructure.

"What I spot is an infrastructure institution ... if we conscionable worth the institution arsenic an infrastructure company, past the numbers conscionable don't marque consciousness from pricing perspective. How does the banal quadruple successful marketplace headdress implicit a 2 oregon 3 twelvemonth period?" helium pointed out.

Even without the Hindenburg report, the prof noted helium was "hard pressed" to explicate wherefore the company's stock is truthful overpriced.

Adani Group's full gross indebtedness reached 2.2 trillion Indian rupees ($26.8 billion) arsenic of end-March 2022, according to calculations by Refinitiv Eikon.

"I americium consenting to judge that Adani Group has played accelerated and escaped with speech listing rules, that it has utilized intra-party transactions to marque itself look much credit-worthy than it genuinely is," Damodaran said successful the blog post.

He added: "Even if it has not manipulated its banal terms directly, it has utilized the surge successful its marketplace capitalization to its advantage, particularly erstwhile raising caller capital."

Damodaran besides said the Adani matter provides an accidental for Indian institutions to larn lessons and effort to hole the problems.

"As for the institutions involved, which see banks, regulatory authorities and [Life Insurance Corporation], I person learned not to property to venality oregon corruption that which tin beryllium attributed to inertia and indifference," the economist said connected his blog.

"A much nuanced mentation of the Adani communicative is that the household radical has exploited the seams and weakest links successful the India story, to its advantage," helium said connected the blog, adding that "there are lessons for the federation arsenic a whole, arsenic it looks towards what it hopes volition beryllium its decennary of growth."

The fallout from the Adani ungraded has raised concerns astir the Group's vulnerability to Indian banks.

State Bank of India, the country's largest lender, told CNBC the loans they person extended to the Adani radical are good covered and determination should beryllium nary contiguous risks.

"The full vulnerability to this entity was conscionable astir 0.88% of the full bank's indebtedness book," Chairman Dinesh Kumar Khara told CNBC's Tanvir Gill an interview.  

"There is nary crushed for anybody to person immoderate concerns oregon doubts relating to our inability."  

Khara added the Adani Group's currency travel concern looks beauteous unchangeable and SBI hasn't been approached for much backing by the conglomerate.

Over the weekend, the Security and Exchange Board of India tried to support Indian markets, saying the country's 2 main indexes – the Bombay Stock Exchange and the National Stock Exchange of India — person demonstrated "ongoing stability" and are "continuing to relation successful a transparent, just and businesslike manner."

— CNBC's Jihye Lee contributed to this report.