Shares Tumble Amid Serious Allegations

Indian billionaire Gautam Adani, head of the Adani Group and a prominent supporter of Prime Minister Narendra Modi, has been indicted in the United States on charges of bribery, fraud, and securities violations. US prosecutors allege that Adani and others orchestrated a scheme to bribe Indian officials to secure lucrative energy contracts. The indictment sent shockwaves through the stock market, causing shares in Adani Group companies to plummet.

1. The Allegations: Bribery and Fraud

US prosecutors claim that between 2020 and 2024, Adani and his associates offered over $250 million in bribes to Indian government officials. These payments allegedly ensured favourable terms for solar power contracts projected to generate more than $2 billion in profits.

• Key Players: The charges involve Gautam Adani, his nephew Sagar Adani, executives of Adani subsidiaries, and former employees of Canadian pension fund CDPQ.
• Alleged Misconduct: Adani reportedly met with Indian officials to advance the bribery scheme, while some co-conspirators deleted emails and provided false information to US authorities to obstruct investigations.

2. Impact on Adani Group

The allegations have reignited scrutiny of the Adani Group, which has previously faced accusations of accounting fraud and stock market manipulation by Hindenburg Research. Adani has consistently denied any wrongdoing.

• Market Reaction: Shares in Adani’s listed companies nosedived:
  • Adani Enterprises fell by 20%.
  • Adani Ports dropped by 16.4%.
• Bond Suspension: Adani Green Energy suspended a planned $600 million bond issue following the indictment.

3. US Government's Stance

US prosecutors and regulators have been vocal about the severity of the case:

• Statement from Prosecutors: Lisa Miller, US Deputy Assistant Attorney-General, stated that the scheme defrauded US investors and relied on extensive documentation to conceal bribe payments.
• SEC's Allegations: The US Securities and Exchange Commission (SEC) accused Gautam and Sagar Adani of misleading investors about Adani Green's compliance policies. They allegedly concealed the use of bribes to secure above-market energy rates from Indian government agencies.

4. Canadian Pension Fund Implications

CDPQ, a Canadian pension fund and shareholder in Adani companies, was drawn into the controversy. Three of its former employees were charged with obstructing the investigation by deleting evidence and misleading authorities. CDPQ stated that these employees had been terminated in 2023 and confirmed its cooperation with US authorities.

5. Political Ramifications in India

The US indictment has sparked political debate in India, with the opposition Indian National Congress party calling it a vindication of their earlier demands for a parliamentary probe into Adani’s ties with the government.

• Opposition Criticism: Rahul Gandhi, leader of the Indian National Congress, has questioned Adani’s close relationship with Modi and his ability to secure government contracts.
• Government Silence: India’s ruling party has yet to comment on the indictment.

6. Adani's Global Expansion

The charges threaten to tarnish Adani’s reputation as a leading industrialist. Over the past two decades, he has expanded his conglomerate beyond ports and trading into sectors like mining, airports, and renewable energy.

• International Projects: Adani Group has operations in countries including Bangladesh, Sri Lanka, and Israel. Recently, Adani pledged a $10 billion investment in US energy infrastructure, aiming to create 15,000 jobs.
• Adani Green’s Ambitions: The company is building one of the world’s largest solar power plants in Gujarat, India, raising $175 million from US investors as part of a larger $750 million bond during the alleged bribery period.

7. Next Steps and Legal Defence

Adani Group has dismissed the allegations as "baseless" and vowed to explore all possible legal options. The SEC's civil lawsuit and the US Department of Justice’s criminal indictment mark the start of what could be a lengthy legal battle.

Conclusion: A Crisis of Trust

The indictment of Gautam Adani poses significant challenges for his conglomerate and could have far-reaching consequences for India’s corporate and political landscape. As investigations continue, investors and stakeholders will be closely watching how Adani Group navigates this critical period.

Source: (FT.com)