(MENAFN- The Arabian Post)
By Nantoo Banerjee
If bribery is a common practice in business, and often viewed as the normal way of doing business in many countries, including India, there is little too sensational about the US Department of Justice indictment, last week, against India's US$37-billion infrastructure conglomerate Adani group head Gautam Adani, his nephew Sagar Adani, Adani Green energy CEO Vneet S Jaain and others for bribing officials in India, raising money from US investors and misleading them. The US prosecutors indicted Gautam S Adani, Sagar Adani and six others for allegedly offering RS.2,029 crore bribes to Indian government officials for securing“lucrative solar energy supply contracts” with state electricity distribution companies.
Last year, the US-based Hindenburg Research accused the Adani Group of engaging in extensive accounting fraud, stock price manipulation, and exploiting tax havens. The report accused the group of extensive stock manipulation and accounting fraud, claiming that these practices had persisted over decades. However, the Indian authorities didn't seem to be quite puzzled or concerned. Business malpractices, including bribery, are not uncommon in India. To many, the Adani group's breathtaking expansion, especially during the present government in India, may look reminiscent to the Ambani group's phenomenal rise during the government under Prime Minister Indira Gandhi.
It is hardly surprising to note that there is no official reaction as yet to the US Justice Department indictment. Over 22 months have passed since the publication of the Hindenburg Research report on the Adani group. India's securities watchdog, SEBI, investigating some of the allegations, is yet to give a report. India's Securities and Exchange Board is now said to have launched an inquiry into US allegations against Adani Group, concerning false statements made to Indian stock exchanges, specifically with regard to information about US investigations. This may end up to be another eyewash. The Adani group is most unlikely to be worried. The group has grown through controversies.
Seemingly inflated share prices of Adani companies were believed to have helped the group raise large funds, mostly from government banks such as SBI, PNB, Bank of Baroda, Canara Bank, Union Bank and institutions such as the Power Finance Corporation (PFC) and Rural Electricity Corporation (REC), to expand at a breakneck speed in recent years. The massive borrowing helped the group achieve a meteoric growth in the last 10 years and became one of India's leading global infrastructure and power enterprises.
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In fact, if the group is in financial trouble, its lenders would be in much greater trouble. The group's gross debt is rising with its expansion. It increased 52 percent to Rs. 63,855 crore for the last September quarter from the end-March level. According to the latest estimate, the Adani Group's total debt is Rs 2.4 lakh crore, with a cash balance of Rs 59,791 crore. Domestic banks including SBI, PNB, and other institutions reportedly hold around Rs 88,100 crore or 36 per cent of the Adani Group's total debt. The US indictment of Gautam Adani and others may have both immediate and long-term implications on PSU banks with significant exposure to the group.
Indian lenders account for more than Rs.88,000 crore of the Adani Group's total debt of Rs.2.41 lakh crore as of March 31, 2024. Following the Hindenburg report in January 2023, several Indian banks and financial institutions had disclosed their exposure to the Adani Group. Quant Mutual Fund was the biggest investor in Adani Enterprises' Rs 4,200 crore qualified institutional placement (QIP) last month. Quant mutual fund (MF) would possibly face the most significant impact among mutual fund houses due to the recent decline in Adani group shares. The public sector Life Insurance Corporation of India (LIC) has 7.86 percent stake in Adani Ports and 1.36 per cent stake in Adani Green Energy Ltd.
The LIC held 16,97,11,417 shares as on September 30, 2024 as per the latest shareholding data available with the BSE. Its stake value in Adani Green Energy fell by Rs. 570 crore over the last Tuesday closing. With the global rating agencies raising concerns over the likely impairing of Adani group's funding access and increase in funding costs, and the group scrapping its $600 million bond offering following the bribery charges in the US, all eyes are back on the Gautam Adani-led group's debt levels.
Boutique investment firm GQG (Global Quality Growth) Partners, led by NRI investor Rajiv Jain, has issued a statement to the Australian Stock Exchanges regarding recent developments involving the US District Court and the SEC's actions against the Adani Group regarding an alleged bribery scheme. GQG Partners, which was among the initial investors to acquire a stake in the Adani Group following the Hindenburg scandal in 2023, stated that it is closely monitoring the charges brought by the US Attorney's Office for the Eastern District of New York and the US Securities and Exchange Commission against Gautam Adani and other executives and companies within the Adani Group.
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The GQG had initially invested Rs.15,446 crore ($1.87 billion) in four Adani companies in March 2023, and since then, its investments appreciated to $5 billion through market gains and further investments. GQG specializes in long-only equities. The firm manages over US$150 billion in client assets in Global, Emerging Markets, International, and US strategies. GQG Partners LLC (“GQG”) is registered as an investment adviser with the U.S. Securities and Exchange Commission.
The Adani group thrived on government contracts. Many suspect that they could not have been achieved without top level government contacts and bribes. The US prosecutors have exposed the alleged role of the specified Adani satraps in a $265 million bribery case to secure solar power contracts in India. They mostly involve government agencies generally believed to be prone to bribery. In India, as in many other countries, some industries and sectors are more prone to bribery than others. They include construction, mining, transportation, defence and military, natural resources and energy, and infrastructure projects.
Paradoxically, the Adani group is involved in all those sectors. The group has secured at least three National Highway Authority of India (NHAI) projects, including Bilaspur-Pathrapali in Chhattisgarh and Mancherial-Repallewada in Telangana, a 50-year lease of six airports – Ahmedabad, Guwahati, Jaipur, Lucknow, Mangalore and Thiruvananthapuram - through a concession agreement with the Airports Authority of India and several large-scale construction projects, including Dharavi slum redevelopment, Ganga Expressway and a mega convention centre in Mumbai. It is unlikely that highly-connected Adanis are worried about the US Department of Justice indictment, except possibly for arrest warrants, for now. The Adani group has denied the allegations, calling them baseless, and said it will seek all possible legal courses. (IPA Service )
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