Analysts: Despite Adani's Indictment, Business Will Be As Usual

By Chetna Gill

Cover Image Attribute: The file photo of Indian billionaire Gautam Adani

The news of Indian billionaire Gautam Adani and his associates facing serious fraud allegations from the US Attorney's Office in New York has sent shockwaves across the business world. They are accused of orchestrating a scheme involving $250 million in bribes to Indian government officials to secure favorable solar power contracts for Adani Green Energy Ltd and Azure Power Global Ltd, a New Delhi-based company formerly listed on the New York Stock Exchange (NYSE). The charges, which include violations of US anti-corruption and fraud laws, carry major legal and financial implications.

A five-count indictment unsealed in a Brooklyn federal court accuses Adani and his associates of soliciting bribes to secure lucrative solar energy contracts for Adani Green Energy, expected to generate over $2 billion in profits. The indictment also claims that US and international investors were misled through false statements to raise funds. In contrast, other individuals, including former employees of a Canadian institutional investor, are accused of obstructing investigations by deleting evidence and providing false information to authorities.

The defendants allegedly concealed the bribery scheme while raising more than $3 billion through loans and bond offerings marketed to US investors. The case, investigated by the Federal Bureau of Investigation and the Department of Justice's Fraud Section, underscores efforts to address corruption and fraud affecting US financial markets. Charges include securities fraud, wire fraud, violations of the Foreign Corrupt Practices Act, and obstruction of justice.

The news of the indictment has had a profound impact on Adani Group firms, causing them to lose a staggering $34 billion in market value on Thursday. This reduction has brought the combined market capitalization of its ten companies down to $147 billion. Adani Green Energy, the firm at the center of the allegations, announced it would not proceed with a planned $600 million bond offering. As India's leading infrastructure tycoon, Adani's businesses are deeply integrated into the country's economy. He operates 13 ports (holding a 30% market share), seven airports (managing 23% of passenger traffic), and the second-largest cement business in India, with a 20% market share.

Adani also dominates India's private power sector with six coal-fired plants and has pledged to invest $50 billion in green hydrogen while managing an 8,000-km natural gas pipeline. His ventures include constructing India's longest expressway and redeveloping the country's largest slum, with over 45,000 employees and a nationwide economic impact. Adani's portfolio closely aligns with Prime Minister Narendra Modi's policy priorities, from infrastructure to clean energy, fueling his growth despite criticism of crony capitalism due to his ties with Modi. While his association with Modi, both as Gujarat's chief minister and India's prime minister, draws scrutiny, it's important to note that Adani has also built relationships with opposition leaders, investing in their states to expand his empire. This indicates that Adani's success is not solely dependent on his ties with Modi, but also on his ability to navigate India's complex political landscape.

This crisis unfolds as Adani has been working for nearly two years to restore his reputation following allegations of stock manipulation and fraud detailed in a 2023 report by US short-seller Hindenburg Research. Although Adani denied the accusations, they triggered a significant market sell-off and prompted an ongoing investigation by India's market regulator, SEBI.

According to Michael Kugelman of the Wilson Center, Adani had made significant strides in rehabilitating his image, securing new deals and investments to demonstrate the strength of his businesses despite the earlier allegations. However, this latest development severely affects the billionaire's efforts to recover. For now, raising capital domestically could become a significant hurdle for Adani's capital-intensive projects. The indictment could also lead to increased scrutiny and regulatory hurdles for Adani's future business operations, potentially impacting his ability to secure new contracts and investments.

Despite the allegations against Gautam Adani, the US-India business relationship is unlikely to face significant disruption. This is the view of Kugelman, who points to recent collaborations such as a $500 million US deal with Adani for a Sri Lankan port project. Kugelman emphasizes that the relationship is vast and multifaceted, making it resilient to the fallout from accusations against a single influential figure in India's economy.

Regarding legal actions, it remains uncertain whether Adani could be targeted under the US-India extradition treaty, as this would depend on the new administration's stance on allowing the cases to proceed. The treaty allows for the extradition of individuals accused of certain crimes, including bribery and fraud, between the two countries. However, the decision to extradite Adani would ultimately rest with the Indian government, which may consider factors such as the strength of the evidence and the potential impact on India's economy. Ambareesh Baliga, an independent market analyst speaking to the BBC, suggests that the situation is far from dire for Adani, noting that foreign investors and banks are likely to continue supporting his ventures, as they did after the Hindenburg controversy, due to his involvement in key, well-performing sectors of India's economy. Market sentiment also leans toward the belief that this issue may eventually be resolved, particularly under the incoming administration.

IndraStra Global is now available on
Apple News, Google News, Feedly, Flipboard, and  WhatsApp Channel

COPYRIGHT: This article is published under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License. https://creativecommons.org/licenses/by-nc-nd/4.0/

REPUBLISH: Republish our articles online or in print for free if you follow these guidelines. https://www.indrastra.com/p/republish-us.html