TotalEnergies stops investment in Adani; GQG bets on Indian government support amid US graft allegations

Mumbai and Bengaluru: France’s TotalEnergies SE, which owns just under a fifth of Adani Green Energy Ltd, has decided not to invest more capital in Adani group companies after indicting top executives of the Indian conglomerate in a $250 million bribery case. Another major investor, Florida-headquartered GQG Partners, is cautiously optimistic that the Indian government will back the Adani group.

Rajeev Jain-led GQG Partners said in a note to its investors that it continues to support the Adani group and that the U.S. prosecutors’ investigations will not have a material impact on the ports and retail conglomerate’s firms. However, GQG expects the investigation to drag on, damaging the Adani group’s ability to attract foreign capital.

“As investors in a wide range of companies around the world, we take any allegation very seriously. However, we recognize the difference between individual and corporate allegations,” GQG Partners said in a Nov. 21 note to investors. Mint reviewed. “We believe the fundamentals of the companies we invest in remain strong.”

GQG Partners and Rajeev Jain did not immediately respond to Mint please leave a comment.

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The US investor acted as a white knight when Adani group shares were in free fall following allegations of fraud by US seller Hindenburg Research in January 2023. As of November 21, GQG Partners has invested in seven listed Adani group companies with a total investment of $8.1 billion.

Shares in GQG Partners fell 20% on the Australian Securities Exchange on November 20 following the indictment of Adani Green executives, including the group’s founder and chairman Gautam Adani. GQG shares have since recovered some of their losses.

The Adani group, which has rejected accusations from US prosecutors and the Hindenburg, on Monday assured its investors that it has enough cash reserves to service its debt obligations and meet growth plans.

The US Department of Justice and the US Securities and Exchange Commission have charged Gautam Adani, Adani Green Energy CEO Sagar Adani and the company’s managing director Vneet Jaain with paying bribes to Indian government officials in exchange for lucrative solar power supply agreements.

The charges include concealing information about an investigation by US federal prosecutors from US investors in raising two bonds and two syndicated loans.

As for TotalEnergies, the company has a 50% stake in three joint ventures with Adani Green Energy. The French energy giant also owns a 37.4% stake in Adani Total Gas Ltd.

In a statement on Monday, the French energy company said it “will not make any new financial contributions as part of its investment in the Adani group of companies” until “the allegations against individuals of the Adani group and their consequences are clarified.”

In September, Adani Green Energy announced an equal joint venture with TotalEnergies for a portfolio of solar projects totaling 1,150 MW at its renewable energy plant in Khavda, Gujarat. TotalEnergies was to invest $444 million “to accelerate the development of these projects,” it said in a media statement.

Also read | Mint Explainer: Indictment of Gautama Adani in the US

New Delhi support

GQG played down the impact of the allegations on the Adani group. While the allegations are serious, it said many other companies have faced similar actions from the US government, citing Walmart, Oracle, Siemens, Pfizer, Toyota and Airbus. Such investigations take years to resolve and could result in reduced penalties and/or fines, he said.

Moreover, GQG expects New Delhi to support Adani.

“We believe that the Indian government will continue to support Gautam Adani as he is the most important infrastructure developer in the country,” it said.

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The US investor says it is unlikely that Indian regulators will probe the Adani group, given that the conglomerate has undergone “thorough scrutiny” since the Hindenburg crisis. However, if New Delhi takes any action, it will have serious consequences for the group’s shares, GQG said.

While GQG said the Adani group may not be able to access foreign capital due to the indictment, it added that no Adani group firm except Adani Green Energy currently needs to raise more capital.

“Given today’s facts, we believe these companies will continue to operate even if individuals receive fines or sanctions,” GQG told its investors.

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