Investors reduced their exposure to the Indian conglomerate as some bankers weighed the possibility of halting new lending. Last week, the group’s billionaire chairman, Gautam Adani, along with seven others, was accused of orchestrating $265 million in bribes to Indian government officials. The alleged payments were reportedly made to secure contracts for coal transportation and the country’s largest solar power project. These accusations have unsettled global banks and investors, potentially hindering Adani’s long-term goals in the capital markets.
Several global banks with debt or equity investments in the Adani group said they would review their positions in the wake of the US indictment. A senior banker said a few have already made changes, such as suspending new lending to the group while maintaining existing loans. But the overall impact on creditor appetite for the group might be limited, as Adani group entities have stable cash flows and are not “desperate” to raise funds shortly, the banker added.
The indictment has jolted Adani dollar bond prices, with short-dated bonds and longer-dated ones declining. Adani Transmission debt due in 2036 fell nearly 2 cents on Monday for a loss of about 10 percent since Wednesday. The broader market selloff is a reminder that the global market for infrastructure bonds can be volatile.
As the scandal has unfolded, many domestic and international investors have taken steps to reduce their holdings of the debt and equity in the Adani group and limit their exposure to other Indian coal and renewable energy companies. A source told Reuters on Friday that the Securities and Exchange Board of India has begun making preliminary checks to see whether Adani entities have adequate disclosures in the local markets.
Some experts say the fallout from the bribery allegations is likely to be more widespread than just the Adani group. They predict that due to the scandal, India’s renewable energy sector, which is a vital part of the country’s drive to cut greenhouse gas emissions, will face reduced foreign investment.
The allegations also cast a shadow over the group’s plans to expand into ports and mining in Australia and may slow down the pace of project financing. “If investors have doubts about the company’s ability to finance projects, it will take longer for the Indian economy to benefit from growth in the clean energy sector,” according to Nimish Maheshwari, an independent analyst who publishes on Smartkarma.
The indictment has not yet led to any arrests and does not imply that the company broke any laws, though if arrested, Adani could be required to appear before a judge on the case in the United States. This process is expected to be smooth and slow. Prosecutors would need to convince the Indian government to grant extradition, a complicated process that can be delayed for years by legal challenges and other issues. If convicted, the company would be subject to fines and other penalties.
