Indian billionaire Adani falls again, but is not out of the game

A bombshell indictment in New York on Wednesday accusing Adani and his associates of paying more than $250 million in bribes to win lucrative government contracts triggered a wild sell-off in stocks.

FSU/AFP

November 23, 2024, 14:00

Last modified: November 23, 2024 at 2:00 pm.

Indian billionaire Gautam Adani speaks at the inauguration ceremony after the Adani Group completed the purchase of Haifa Port in early January 2023 in Haifa Port, Israel. Photo: Collected

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Indian billionaire Gautam Adani speaks at the inauguration ceremony after the Adani Group completed the purchase of Haifa Port in early January 2023 in Haifa Port, Israel. Photo: Collected

Indian billionaire Gautam Adani’s feverish efforts to expand his global energy and infrastructure empire have been undermined by US graft allegations, but analysts believe the tycoon will bounce back.

Wednesday’s bombshell indictment in New York accusing Adani and his associates of paying more than $250 million in bribes to secure lucrative government contracts triggered a wild sell-off in stocks.

Hours later, Indian opposition leader Rahul Gandhi demanded Adani’s arrest, and Kenyan President William Ruto pulled out of some $2.5 billion in airport and power deals.

The Adani Group has dismissed the bribery allegation as “baseless” but Sriram Subramanian, founder of corporate governance consultancy InGovern Research Services, said it has “huge” implications.

“They will defend themselves by filing an appeal or they will go for a settlement,” Subramanian told AFP from Bengaluru.

“This is a big blow to their reputation and corporate governance practices,” he added.

“Pale in comparison”

The meteoric rise of Adani, once the world’s second richest man, has been beset by controversy and accusations that he benefited from his close ties to Hindu nationalist Prime Minister Narendra Modi.

The conglomerate has weathered previous allegations of wrongdoing that have seen its market value fall by $150 billion in 2023 after a report by US short-selling firm Hindenburg Research accused the company of “brazen” corporate fraud.

“Given Adani’s influence, his resources and his access, he has the ability to bounce back, (and) we saw that last time,” Michael Kugelman, director of the South Asia Institute at the Wilson Center, told AFP.

The Adani empire, spanning coal, airports, cement and media, has interests in countries from Australia to Bhutan, Israel, Sri Lanka, Tanzania and Nepal.

But Kugelman warned that this time the task is “unprecedented.”

“If you are charged by the U.S. justice system, the severity and scope will be completely different,” Kugelman said.

“The Hindenburg pales in comparison to what he faces now.”

Allegations of bribery are a huge embarrassment for key investors and have prompted grassroots demands for greater scrutiny of major projects.

In neighboring Sri Lanka, activists opposing Adani Green Energy’s $442 million wind power project have called for the deal to be suspended.

“Risk tolerance among investors who supported him during the Hindenburg would have been much lower,” Kugelman said.

‘Slow down’

Adani is India’s largest private port operator and operates key airports including the financial capital Mumbai and Ahmedabad, the largest city in Modi’s home state of Gujarat.

The group is also involved in large-scale coal and renewable energy projects in the world’s fifth largest economy.

In October, Gautam’s nephew and board member Sagar Adani, also named in the indictment, told AFP there was “no political connection” between the Adani Group and the Modi government.

Hemindra Hazari, a Mumbai-based market analyst, said the conglomerate, a relatively new player in key infrastructure sectors, was backed by large investors who would otherwise have been wary because it was “perceived to be close to the establishment.”

“Most of them invested despite the group’s limited management capabilities and experience… precisely because… it was perceived to be receiving very favorable terms… which in any normal market economy would not be possible,” he told AFP Press.

A “significant portion” of Adani’s debt was raised from foreign sources, including banks and institutional investors, and “things will slow down for them for now,” he said.

“Reputation Blows”

The Indian government has not yet commented.

Opposition leader Rahul Gandhi, however, was quick to demand Adani’s arrest but told reporters he knew it would not happen, claiming that “Modi is protecting him.”

Modi’s Bharatiya Janata Party (BJP) responded by saying the alleged graft involved Indian states led by opposition parties.

Subramanian believes this is just a “dent” in Adani’s reputation and that they will “continue to seek and win projects across India and the rest of the world.”

But Kugelman warned that the “reputational blows” not only to the Adani group, but also to India, would be “serious.”

As for the future, how the allegations will affect new US President Donald Trump remains “unknown”, Kugelman said.

“I don’t think it will really impact the broader India-US relationship,” he said.

But he noted that Trump could view a wily businessman like Adani “favorably” or “use him for more favorable tariff policies.”