2024 was a year of significant upheaval for one of India's largest conglomerates, the Adani Group led by its promoter Gautam Adani. Once the mighty symbol of India’s rise in the global business circles, the Adani Group, which is active in infrastructure-to-renewable-energy-to-defence-to-FMCG sectors, faced intense scrutiny, both domestically and internationally.
This scrutiny intensified following a short-seller report by Hindenburg Research in early 2023, which was followed by another report by a network of investigative journalists known as the Organised Crime and Corruption Reporting Project (OCCRP) in September last year. As a result, the Adani Group, which was founded less than four decades ago in 1988 by Gautam Adani remained under public scrutiny throughout this year as well. At the end of this year, in November 2024, the bombshell for the Adani Group came in the form of an indictment by the US Court of Eastern District of New York.
Two earlier reports were by private entities, but they made an adverse impact on the valuation of Adani Group stocks and severely dented the personal wealth of its promoter Gautam Adani. However, the formal indictment of Adani Group and its officials by a US district court for their alleged role in an over $250 million bribery scheme related to power supply deals with the Solar Energy Corporation of India (SECI), a state-owned company under the Ministry of Renewable Energy. The Adani Group has refuted the allegations.
As expected, the US indictment reverberated through the stock market, affecting investor sentiment, altering business partnerships, and, ultimately, damaging the financial standing of both the Adani Group and its billionaire promoter, Gautam Adani.
The US Indictment And Its Impact On Adani Group
In addition to the continued adverse impact of the Hindenburg and OCCRP reports in 2023, this year was marked by the US indictment of several Adani Group officials and its companies under the US Foreign Corrupt Practices Act (FCPA), compounding the Adani Group’s woes that started with Hindenburg report last year.
This indictment was based on the allegations that certain officials within the Adani Group had been involved in fraudulent activities related to the group’s effort to raise money from US investors. the US authorities accused the group of having misled investors through false financial disclosures and manipulative trading practices in US markets. These developments sent shockwaves through the financial community, leading to further declines in the stock prices of Adani Group companies and exacerbating the damage done by the Hindenburg and OCCRP reports.
In the wake of the indictment, several institutional investors and global firms distanced themselves from the Adani Group. The repercussions were immediate and severe. Rating agencies such as Moody’s and Fitch changed their ratings of Adani Group companies. Additionally, European financial institutions, including Jefferies and Barclays, reevaluated their involvement in financing projects with the Adani Group, expressing concern about the reputational risks tied to the growing controversy.
Other Countries And Companies Walk Away
The US indictment and the ongoing scrutiny, including regulatory investigations in multiple countries, caused foreign businesses and global investors to reassess their ties to the Adani Group. Several multinational companies and joint venture partners walked away from business arrangements, signalling growing caution about engaging with Adani-affiliated companies.
For example, in Europe, some of Adani Group’s partnerships in the renewable energy sector faced challenges. Companies in the solar energy space that had considered collaborations with Adani Green Energy chose to scale back or suspend talks, given the rising regulatory scrutiny on the group’s business practices. For example, Total Energies suspended any further investment into Adani Group companies.
Similarly, Kenya ordered the cancellation of Adani infrastructure deals worth more than $2.5 billion. Moreover, following the US indictment, authorities at a US developmental agency, which had earlier agreed to finance Adani Port in Sri Lanka are studying the impact of the indictment.
There are reports that Muhammad Yunus led the new administration in Bangladesh and has also set up a panel to look into Adani Group’s Bangladesh operations.
Controlling The Damage
Adani Group’s efforts to address the allegations--such as engaging in legal battles and attempting to provide transparency--were not enough to offset the damage. While the group continued to assert that the Hindenburg report and OCCRP reports were baseless and malicious, the group’s public image and investor sentiment suffered long-term consequences.
What’s In Store For Gautam Adani In The New Year?
The US indictment has come as the biggest challenge for Gautam Adani so far. The US authorities have charged him with securities fraud, securities fraud conspiracy and wire fraud conspiracy.
It means that Gautam Adani and other indicted Adani Group officials are unlikely to travel to the US or other countries where they may face arrest and extradition to the US to face the trial. As per reports, Adani Group was given 21 days time to file their response to the indictment in the US Court. However, it is not yet clear what legal remedies the group is pursuing in the USA to tide over the most severe legal challenge since its founding in 1988.
