Adani may see wider impact from US setback

Mumbai: The Adani Group denied bribery charges and vowed to explore legal options after a damaging indictment in the US, but the move failed to stop a run in its shares, posing the biggest test yet for the conglomerate which had rebuilt investor faith after the Hindenburg episode.

Concluding more than two years of investigation, the US Department of Justice accused group founder Gautam Adani, his nephew Sagar Adani, and six executives of Canadian pension fund CDPQ and its investee company Azure Power, of bribing Indian officials to the tune of ₹2,029 crore to secure favourable green power supply agreements. The US authorities also accused the Adanis of securities fraud for allegedly lying about the group's anti-bribery practices, and concealing investigations while raising funds in the US and elsewhere.

Prosecutors alleged that between 2020 and 2024, these individuals bribed unnamed Indian officials to secure solar energy supply contracts. Separately, the US Securities and Exchange Commission (SEC) accused the Adani Group of misconduct stemming from what it described as a “massive bribery scheme."

“The Adani Group has always upheld and is steadfastly committed to maintaining the highest standards of governance, transparency and regulatory compliance across all jurisdictions of its operations,” a press statement from the group read.

Investors in Adani group companies lost ₹2.24 trillion as shares plunged, reviving memories of the Hindenburg report in January 2023. However, the US indictment could have a wider impact, lawyers said, potentially involving hefty fines, disgorgement of assets and class action lawsuits, besides losing access to the wealthy investors who have so far backed the tycoon. Adani Green Energy, the alleged beneficiary of the bribes, said it has decided not to proceed with a proposed $600 million dollar bond issue, citing the US indictment.

Also read | Adani bribery case: whistleblowers, WhatsApp texts, and ‘incentives’

On Thursday, Kenya cancelled the process of awarding control of the Nairobi airport to Adani, attributing the decision to "new information provided by investigative agencies and partner nations". Adani was to add a second runway at the Jomo Kenyatta international airport and upgrade the passenger terminal, Reuters reported.

Ratings firm Moody’s said the bribery charges will have a negative implication for the creditworthiness of Adani Group firms.

"Our main focus when assessing Adani Group is on the ability of the group’s companies to access capital to meet their liquidity requirements and on its governance practices,” the ratings agency said.

Shares of Australia's GQG partners, one of Adani's biggest backers, shed a fifth of their value on the Australian stock exchange. The investment firm's boss Rajiv Jain had come in as a white knight for Adani following the Hindenburg report, investing billions of dollars and helping restore investor confidence.

“Our team is reviewing the emerging details and determining what, if any, actions for our portfolios are appropriate,” GQG Partners said, adding that more than 90% of its investments were in assets unrelated to the Adani Group.

Also read | Mint Explainer: What is the US indictment of Gautam Adani all about?

Since the Hindenburg setback, Adani Group has spent considerable resources to restore investor confidence. Shares of Adani Ports and SEZ and Adani Power crossed the peaks seen before the Hindenburg repot, while others also recovered the bulk of the losses as investors slowly reposed their faith in the self-made billionaire from Ahmedabad.

Winning back investors may be harder this time, experts said, as the accuser is not a short-seller who stands to gain from Adani's fall, but investigators in the world’s largest economy.

"When a court of law in the US has stated that the Adanis have been bribing government officials, institutional investors, especially those coming from Western countries, will be hesitant to invest in Adani companies for the time being,” said Sharmila Gopinath, an independent corporate governance consultant. “The Adani Group will have to do much more than pointing fingers and calling it an attack against India to overcome the reputational damage this time," she said.

A more pressing crisis would be the legal fallout. Adani firms could face a class-action lawsuit in the US from investors from whom the Adani Group withheld information about the bribes, legal experts said.

"I think he (Gautam Adani) will spend more time in India now. Because if an arrest warrant is issued, he could be arrested in many countries,” said H.P. Ranina, a senior Supreme Court lawyer.

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The Adani Group said that it will explore all legal options.

Canada's CDPQ said it was aware of the charges against its former employees by the US authorities.

"Those employees were all terminated in 2023 and CDPQ is cooperating with US authorities. In light of the pending cases, we have no further comment at this time,” the pension fund said.

Azure Power, CDPQ’s investee company in India which was alleged to be part of the bribery scheme, made a similar statement.

“As we initially disclosed in January 2023 and in subsequent filings and annual reports, we have been cooperating with those agencies in relation to those and other matters and we will continue to do so. The former directors and officers of Azure referenced in the US Department of Justice and US Securities and Exchange Commission actions have been separated from Azure for more than a year,” the company said.