Adani Group faces US bribery allegations

Bribery Allegations
Bribery Allegations

The U.S. Department of Justice and the Securities and Exchange Commission have accused Gautam Adani, chairman of the Adani Group, of bribery in a $265 million scheme to secure contracts for a solar power project in India. The project is expected to yield $2 billion in profits over two decades. The case also involves a September 2021 bond issuance by Adani Green, which raised $750 million, including $175 million from U.S. investors.

Prosecutors claim the offering documents contained misleading statements about anti-corruption measures.

The Adani Group has strongly denied the allegations, calling them “baseless.” Despite the denial, there are growing concerns that these developments could impact the broader market and exacerbate foreign portfolio investor (FPI) outflows from Indian equities. FPIs have been on a selling spree over the last one and a half months, withdrawing funds from Indian equities at an unprecedented pace.

In November alone, FPIs pulled out an additional ₹42,000 crore, bringing the total outflows to ₹1,56,000 crore in less than two months, marking the largest consecutive selling streak on record. Riya Oswal Bafna, Co-Fund Manager at Purnartha, emphasized that the Adani incident cannot change the massive opportunity India offers in the long term. She highlighted key factors such as the country’s young demographic dividend, rising per capita income, and increased fiscal spending as indicators that India remains an attractive growth story.

“These are strong indicators that India will not lose its mojo anytime soon,” Bafna said. “A one-off event cannot derail the larger picture at stake.

Adani Group denies bribery claims

This is a temporary phase and should not affect long-term sentiments.”

Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services, added, “Mainly three factors led to this massive selling by FIIs: the ‘Sell India, Buy China’ trade, concerns surrounding FY25 earnings, and the ‘Trump trade.’ Of the three, the ‘Sell India, Buy China’ trade is over, and the Trump trade appears to be on its last leg. Therefore, the FII selling in India is likely to taper off soon.

Additionally, valuations of large caps in India have come down from elevated levels.”

The U.S. development agency is currently evaluating the potential impacts of Adani Group’s project in Sri Lanka amid growing scrutiny and regulatory oversight of international infrastructure investments. The indictment raises questions about corporate governance and crony capitalism in India’s economy, particularly as Prime Minister Narendra Modi has pledged to make India the world’s third-largest economy. The controversy is likely to put Modi’s Bharatiya Janata Party-led government, seen as close to Adani, in an awkward spot.

Opposition lawmakers are likely to escalate pressure on Modi when the winter session of parliament begins next week. The controversy has already affected Adani’s interests overseas, with Kenya’s president canceling multimillion-dollar deals with the Adani group. Some analysts believe the impact on investors will be limited mainly to the Adani group.

“There are no fears of a financial contagion — at this point, the effect is centered on the group rather than the market. It could slow down the group’s expansion and growth as it will become more difficult for Adani to raise funds,” said Ambareesh Baliga, an independent market analyst.

Adam Josefs

More Stories