The charges, which the Adani Group denied, have sent shockwaves through financial markets and political corridors alike. The allegations not only rattled markets, but also reignited political debate in India.
Here’s how the saga has unfolded and what lies ahead for the conglomerate.
What has happened so far?
The US Department of Justice alleged that Adani and a few others used bribery to secure contracts and misled investors and lenders by concealing the corruption. These charges include securities fraud, wire fraud conspiracy, and violations of anti-bribery laws, with penalties that could significantly impact the group’s finances and operations.
Adani Group has denied the allegations, calling them baseless and emphasizing compliance with all laws. An official spokesperson stated that the charges remain unproven and assured stakeholders of taking all possible legal recourse.
Stocks, dollar bonds and the resultant fallout
The fallout from the indictment has been swift in the financial markets. Adani Group stocks have taken a severe beating, with shares of Adani Green Energy plunging nearly 19%. The losses swept through across other entities like Adani Transmission and Adani Ports as well.
Dollar bond prices for the group also dropped sharply, reflecting heightened investor anxiety.
The group has had to cancel plans to raise $600 million via dollar-denominated bonds. Meanwhile, Kenya terminated a multimillion-dollar airport expansion deal with the conglomerate, underscoring the international ramifications of the case.
GQG, a major Adani investor, said it was monitoring the changes and that the team is reviewing the emerging details and determining what, if any, actions for the portfolios are appropriate. The US-based fund last year bought 3.4% of Adani Enterprises – the group’s flagship firm, 4.1% of Adani Ports, 2.5% of Adani Transmission and 3.5% of Adani Green Energy.
Also Read: $12 billion bill for $265 million bribe charges! How Gautam Adani can fight back
Political crossfire
The story got further fuel from India’s political landscape, where Congress leader Rahul Gandhi demanded Gautam Adani’s immediate arrest, accusing the BJP-led government of complicity in the alleged malpractices.
The ruling BJP dismissed Gandhi’s remarks, pointing out that the states mentioned in the indictment were under opposition rule during the time of the alleged offenses.
While the opposition has seized the opportunity to target the Adani-Modi nexus, the BJP has framed the issue as part of a broader smear campaign against the Prime Minister.
What next?
Adani Group has two options in front of them – appealing against the charges and exploring settlement options. Under US laws, companies involved in bribery cases can resolve allegations through deferred prosecution Agreements (DPAs) or non-prosecution agreements (NPAs).
There are precedents with Siemens ($800 million) and Ericsson ($1 billion), which were indicted, in getting charges quashed through settlements. Experts believe the settlement would involve substantial monetary penalties, implementing enhanced compliance measures and independent monitoring.
Proxy advisory firm InGovern Research suggests that borrowing costs for Adani’s projects may increase due to the allegations. However, a resolution could stabilize investor sentiment and help the group regain footing, albeit at a significant cost.
Analysts’ take
Market experts are divided on the long-term impact of the bribery allegations. Analysts at SKI Capital noted that a settlement could restore some stability, but the group’s ability to raise international funds could remain constrained in the near term.
“The appeal process and potential settlement options allow Adani Group some room to maneuver,” said Narinder Wadhwa, Managing Director of SKI Capital. However, the reputational damage, combined with heightened scrutiny, could make it harder for the group to secure large international investments in the future.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)
