TotalEnergies halts Adani investments; GQG bets on Indian govt backing amid US bribery charges

Mumbai and Bengaluru: France’s TotalEnergies SE, which owns just under a fifth of Adani Green Energy Ltd, has decided not to invest more capital in Adani group companies following the indictment of the Indian conglomerate’s top executives in a $250-million bribery case. Another major investor, Florida-based GQG Partners, is cautiously optimistic, expecting the Indian government to back the Adani group.

Rajiv Jain-led GQG Partners said in a communication to its investors that it continues to back the Adani group and that investigations by US prosecutors would have no material impact on the ports-to-retail conglomerate’s firms. However, GQG expects the investigations to be long-drawn, hurting Adani group’s ability to borrow foreign capital.

“As investors in broad area of companies, globally, we take any indictment very seriously. That said, we recognize the distinction of the allegations of the individuals vs the companies,” GQG Partners said in its note to investors on 21 November, which Mint has reviewed. “We believe the fundamentals of the companies we are invested in remain sound.”

GQG Partners and Rajiv Jain did not immediately respond to Mint’s request for a comment.

Also read | Adani may see wider impact from US setback

The American investor had come as a white knight when the Adani group’s stocks were in free fall following allegations of fraud by US short-seller Hindenburg Research in January 2023. As of 21 November, GQG Partners was invested in seven listed Adani group companies with a total exposure of $8.1 billion.

GQG Partners’ shares tumbled 20% on the Australian Securities Exchange on 20 November following the indictment of Adani Green executives, including group founder and chairman Gautam Adani. GQG’s shares have since recouped part of the losses.

Adani group, which has denied the allegations by US prosecutors and Hindenburg, on Monday assured its investors that it had enough cash reserves to service its debt obligations and meet its growth plans.

The US Department of Justice and the US Securities and Exchange Commission have charged Gautam Adani, Adani Green Energy executive director Sagar Adani, and the company’s managing director Vneet Jaain with allegedly paying bribes to government officials in India in exchange for favourable solar power supply agreements.

The charges include withholding information on the investigation by US federal prosecutors from American investors when raising two bonds and two syndicated loans.

As for TotalEnergies, the company has a 50% stake in three joint ventures with Adani Green Energy. The French energy giant also holds a 37.4% stake in Adani Total Gas Ltd.

In a statement on Monday, the French energy firm said it “will not make any new financial contribution as part of its investments in the Adani group of companies” until “the accusations against the Adani group individuals and their consequences have been clarified”.

In September, Adani Green Energy announced an equal joint venture with TotalEnergies for a portfolio of solar projects totalling 1,150 MW at its renewable energy plant in Khavda, Gujarat. TotalEnergies was to inject $444 million “to accelerate the development of these projects”, it had said in a media statement.

Also read | Mint Explainer: The US indictment of Gautam Adani

New Delhi’s support

GQG downplayed the impact these allegations can have on the Adani group. While the allegations are serious, it said many other companies have faced similar US government action, citing Walmart, Oracle, Siemens, Pfizer, Toyota, and Airbus. Such investigations take years to resolve and may result in reduced penalties and or fines, it said.

Moreover, GQG expects New Delhi to back Adani.

“We feel the Indian government will maintain its support for Gautam Adani as he is the most important infrastructure developer in the country by order of magnitude,” it said.

Also read | Adani bulls cut positions before news of US indictment

The American investor believes it is unlikely that Indian regulators will probe the Adani group given that the conglomerate has been through a “thorough review” in the aftermath of the Hindenburg crisis. However, if there is any action from New Delhi, it will have big implications for the group’s stocks, GQG said.

Although GQG said the Adani group may not be able to access foreign capital because of the indictment, it added that no Adani group firm other than Adani Green Energy presently needs to raise more capital.

“As the facts stand today, we believe these companies will keep operating even if individuals receive fines or sanctions,” GQG informed its investors.

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