Weekend Bites: Adani Casts Off Hindenburg Curse, And Demons In Angel Tax

For about a decade or so, it seemed nobody could stop Gautam Adani. His eponymous business group scaled new peaks in diverse businesses. Adani, the man, zoomed up the list of the world’s richest to reach, for a while, the second spot.

Then, on January 24, the United States-based short-seller, Hindenburg Research, released a report casting serious allegations and raising concerns over the group’s debt and valuation. Things turned topsy-turvy. Share prices of Adani companies plummeted, dragging along their chief’s ranking on the rich list.

Now, it seems, the group, and the man, are emerging out of the depths.

Story of the week: Adani out of the woods

Tuesday was the third consecutive day of

for Adani stocks, with two of them nearly erasing all the Hindenburg-caused losses. It was the day US-based GQG Partners raised its investment in the group and expressed the willingness to back any of the Adani group’s “new offerings”.

In an interview with Bloomberg, GQG's chief investment officer, Rajiv Jain, said, “Within five years, we would like to be one of the largest investors in Adani Group.” Without specifying the companies, he said GQG had raised its stake in the group by 10 per cent, and that its holding’s value had reached $3.5 billion.

GQG had made a huge contrarian call on Adani by investing Rs 15,000 crore when the Hindenburg-induced erosion was in full swing.

Another source of succour to Adani was the interim report of the Supreme Court-appointed expert committee, which said it had not found any conclusive evidence to support Hindenburg’s allegations. For its part, the group has been moving heaven and earth to prune its debt.

Investment bankers told

high-profile investors others than GQG could also be

. It seems Abu Dhabi Investment Authority, International Holding Company, and the Hinduja group have shown interest in the forthcoming share sale of the Adani group companies.

In other news…

The draft Digital India Bill will have special provisions for

, Rajeev Chandrasekhar, minister of state for electronics and IT, told Business Standard. The draft of the Bill will be released by the first week of June for public consultation.

Wads of Rs 2,000 notes have been gushing out at Posta Bazar, North Kolkata, one of the largest wholesale markets for perishable commodities in east India. Posta Bazar symbolises the

– by everyone from jewellers and wholesalers to neighbourhood fruit vendors, shopkeepers in malls, and petrol pumps.

Watch it: From The Morning Show

What is Suveen obsessing over?

The origin of India’s so-called Angel Tax lies in scandal, said a report in The Economist in March. A government official allegedly directed money through a shell company and declared the proceeds to be investment, not taxable income.

Pranab Mukherjee, as the finance minister presenting the Budget in 2012, added a provision to curb such tax evasion. If investors bought shares in unlisted companies by paying more than their fair market value, the recipients would have to pay a tax on the excess money.

In this, as sometimes happens with sweeping policies, the baby was thrown out with the bathwater. The baby, in this case, were start-ups, which typically operate on meagre revenues, usually make losses, and yet command high valuations during investment rounds because of the promise they hold. So, the fair value at present can be astonishingly different from the value investors see in their future.

As the implications of the Angel Tax sank in, exemptions came. Start-ups were exempted if they had not completed 10 years, had a turnover of less than Rs 100 crore, and their paid-up share capital was less than Rs 25 crore. Most importantly, start-ups did not have to pay tax if they raised funds from foreign entities.

Nerves were calmed. But that was until this year’s Budget sought to apply the tax on money from foreign investors, including venture capital firms and pension funds not registered with Sebi, the securities markets regulator.

In April, the Income-Tax Department

to start-ups for raising capital at an “excessive premium” from domestic investors between the assessment years 2018-19 and 2020-21. To compound matters, the Budget and the notices came in the middle of what is being called the funding winter for India’s start-ups. This prompted our Edit Page team to write a moving piece: “

.”

However, Singapore, Ireland, the Netherlands, UAE, and Mauritius did not find a mention. Investment vehicles in Mauritius and Singapore are used by global investors to invest in unlisted Indian companies. Experts say it is not clear whether special-purpose vehicles in non-specified countries will get immunity from the tax.

It is good to see the wheels turn. Is it turning enough?

One thing is sure, we have not fully exorcised the demons of the Angel Tax.

This is Suveen signing off. Please send comments, news, or views about anything — from recovering tycoons to demons living inside angels — to suveen.sinha@bsmail.in.