Two of the largest investors in the Adani group have made contrasting investment decisions after US authorities indicted Gautam Adani and two other directors in a $250 million bribery case.
French oil giant TotalEnergies, which has invested $3.85 billion in Adani group companies since 2019, said on Monday that it had decided to hold off on new investments until the allegations are clarified.
US-based GQG Partners affirmed its faith in the Adani group, expecting that the Indian government would back the ports-to-retail conglomerate. The American investor, though, added in a note to investors on 21 November that it expects the investigations to be long-drawn, hurting Adani group’s ability to borrow foreign capital.
“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,” GQG Partners said in its note, which Mint has reviewed.
“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. We believe the fundamentals of the companies we are invested in remain sound,” said GQG Partners.
Also read | Adani may see wider impact from US setback
GQG Partners had come as a white knight when the Adani group’s stocks were in free fall following US short-seller Hindenburg Research’s allegations in January 2023 of stock manipulation and accounting fraud by the Ahmedabad-based conglomerate.
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 Securities and Exchange Board of India is yet to submit its report on the Hindenburg allegations to the Supreme Court.
TotalEnergies, which has a 50% stake in three joint ventures with Adani Green Energy Ltd and a 37.4% stake in Adani Total Gas Ltd, had put on hold all new investments in Adani group companies following Hindenburg’s allegations in January last year. It also holds a 19.75% stake in Adani Green Energy.
However, after almost a year of pause, in December last year, Adani Green Energy announced the completion of a 1,050 MW equal joint venture with TotalEnergies, with a $300 million investment from the French company.
In September this year, Adani Green Energy announced another equal joint venture with TotalEnergies for 1,150 MW of solar energy projects, with the French company investing $444 million in it.
“Until such time when the accusations against the Adani group individuals and their consequences have been clarified, TotalEnergies will not make any new financial contribution as part of its investments in the Adani group of companies,” the French oil giant in a statement on Monday.
TotalEnergies added that it was not made “aware of the existence of an investigation into the alleged corruption scheme” by the Adani group.
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.
While TotalEnergies is a strategic investor in Adani group joint ventures, GQG Partners is a financial investor, acquiring holdings in the group’s stocks.
Rajiv Jain-led GQG Partners said in its note to investors that it expects the bribe investigations to have no material impact on Adani group companies.
Since March last year, GQG Partners has poured in close to $3 billion in buying stakes in seven of the Adani group’s 11 listed companies. As of 21 November, GQG Partners had a total exposure of $8.1 billion to these seven companies.
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.
GQG Partners and Jain did reply to Mint’s request for comment.
At least one lawyer expects the bribery indictment to be a long-drawn episode.
“TotalEnergies’ statement is saying I'll curtail my risk and not make any new investments until I have clarity. GQG Partners’ rationale, in contrast, states that it continues to have full faith in the group and the Indian government and that the Adani group will continue to do well. It is for investors to choose which of the two views they want to accept,” said Sakate Khaitan, senior partner at Khaitan Legal Associates.
“But the undeniable thing to note is that this indictment by the US federal prosecutors is not something that can be resolved quickly.”
