Signage atop the Adani Group headquarters in Ahmedabad, India, on Wednesday, Feb. 1, 2023. Bonds of the Indian billionaires flagship firm plunged to distressed levels in US trading, and the company abruptly pulled a record domestic stock offering.
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Adani Group is staring at trouble on several fronts as investors and partners rethink ties with the Indian conglomerate in the wake of bribery and fraud accusations by U.S. authorities.
Projects and investments tied to the Indian conglomerates’ businesses spanning across the world have come under the spotlight, following the U.S. indictment of its billionaire founder on bribery and fraud charges last Thursday.
“The US indictment is likely to constrain the group’s access to new financing in the near term, particularly in the offshore capital markets, Leonard Law, a senior credit analyst at Lucro Analytics told CNBC. The group has denied any wrongdoing.
The allegations are “more serious” than those from short-seller Hindenburg Research’s report in 2023, and the legal proceedings are likely to be protracted, he added.
Fitch Ratings has put several dollar bonds issued by Adani Group companies on its negative ratings watchlist, which means the bonds could potentially be downgraded.
The action reflects higher corporate governance risk and “potential contagion risk” that could affect access to funding and liquidity.
Following the bombshell indictment last week, which triggered a selloff in the conglomerate’s stocks, Kenyan president William Ruto scrapped airport and electricity deals worth about $2.5 billion with the group, Reuters reported.
In another blow to the conglomerate, French energy giant TotalEnergies, on Monday suspended new investments linked to Adani Group and claimed it was not informed of the investigation into the alleged corruption scheme.
“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 company said.
Shares of the French oil major, which owns a 19.75% stake in Adani Green Energy and a 50% holding in joint ventures with Adani Green, fell 2.4% on Monday.
The U.S. International Development Finance Corp has also said it would review its prior agreements to lend $553 million to a Sri Lankan port development that’s backed by the Adani Group.
“DFC is aware of the recent allegations related to Adani and is actively assessing the ramifications in light of the recent DOJ announcement,” an official with the development agency said in a statement.
Summons, more probes, calls for arrest
The New York Federal Prosecutors last week indicted Gautam Adani, chairman of Adani Group, and seven other people on charges of paying about $265 million in bribes to Indian government officials to secure solar energy contracts that could yield more than $2 billion of profits over 20 years.
The charges also included misleading U.S. and international investors about the its compliance with antibribery and anticorruption practices, while raising more than $3 billion in capital to fund these energy contracts.
In an escalation of its stateside legal battle, Adani and his nephew, Sagar Adani, were reportedly summoned by the U.S. Securities and Exchange Commission over their involvement in the alleged bribery.
The Adani group representatives did not immediately respond to CNBC’s request for comments on Tuesday. The company had earlier said the U.S. authorities’ accusations were “baseless” and that it will seek “all possible legal recourse.”
Meanwhile, India’s opposition leader Rahul Gandhi has already called for Adani’s arrestaccording to domestic media.
Further, Indian securities watchdog is reportedly probing whether the Adani group failed to disclose information regarding the U.S. DOJ’s investigation into its bribery charges.
Proceedings in the country’s parliament were suspended on Monday after disruptions from lawmakers who demanded a discussion on the Adani’s corruption allegations.
A fresh petition has also been filed in the Indian Supreme Court seeking a probe into the bribery charges by the Indian authorities, according to local media.
Adani Group had spent the bulk of last year attempting to move past a scathing report by the short-seller Hindenburg Research that accused it of financial misconduct and stock manipulation.
Shares of the Indian group’s flagship firm Adani Enterprises has declined over 20% as of Tuesday since the notice of indictment, while the company in the eye of the storm Adani Green Energy has lost more than 35%.
Adani Power has shed around 15% while Adani Ports and Special Economic Zone shares price dropped 11% since then.
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