Adani Group firms lost $34bn in market value on Thursday, reducing the combined market capitalisation of its 10 companies to $147bn.
Advertisement India’s economy is deeply intertwined with Mr Adani, the country’s leading infrastructure tycoon.
With six coal-fired power plants, Mr Adani is India’s largest private player in power.
(Like any successful businessman, Mr Adani has also forged ties with many opposition leaders, investing in their states.)
Though Mr Adani denied the claims, the allegations triggered a market sell-off and an ongoing investigation by India’s market regulator, SEBI.
The political and economic effects of Adani’s US fraud charges in India.
Four hours ago.
Soutik Biswas. .
The correspondent for India is @soutikBBC.
Within weeks of Donald Trump’s election victory, one of the wealthiest men in the world, Gautam Adani, declared his intention to invest $10 billion (£7.9 billion) in infrastructure and energy projects in the United States.
A close ally of Prime Minister Narendra Modi, the 62-year-old Indian billionaire now faces US fraud charges that could jeopardize his aspirations both domestically and internationally. His $169 billion empire includes renewable energy and ports.
He has been charged by federal prosecutors with planning a $250 million bribery scheme and hiding it in order to raise funds in the United States. They contend that in order to obtain contracts worth $2 billion in profits over a 20-year period, Mr. Adani and his executives bribed Indian officials. Adani Group has referred to the accusations as “baseless” and denied them. “,”.
However, the group and the Indian economy are already suffering as a result of this.
The market value of Adani Group companies dropped by $34 billion on Thursday, bringing the total market capitalization of its 10 businesses down to $147 billion. The company at the heart of the accusations, Adani Green Energy, also declared that it would not move forward with a $600 million bond offering.
The charges’ effects on Indian politics and business are also a matter of concern.
Mr. Adani, India’s top infrastructure tycoon, has a significant impact on the nation’s economy. In addition to operating seven airports (which account for 23% of passenger traffic), he also runs India’s second-largest cement company (20%) and 13 ports (30%).
India’s biggest private power company is Mr. Adani, which has six coal-fired power plants. In addition to running a natural gas pipeline that is 8,000 kilometers (4,970 miles) long, he has committed to investing $50 billion in green hydrogen. Along with redeveloping India’s largest slum, he is also building the country’s longest expressway. His companies affect millions of people across the country, but he employs more than 45,000 people.
The wealthiest man in Asia is Gautam Adani.
Mr. Adani has plans to build airports, energy projects in Kenya and Morocco, and coal mines in Australia and Indonesia. The organization plans to invest over $1 billion in infrastructure projects in Kenya and Tanzania.
Adani’s portfolio, which started with infrastructure and more recently branched out into clean energy, closely reflects Modi’s policy priorities. He has prospered in spite of his business empire being branded as crony capitalism by critics who point to his close relationship with Modi as prime minister of India and as chief minister of Gujarat, where they both come from. (Like any prosperous businessman, Mr. Adani has invested in the states of numerous opposition leaders and developed relationships with them. ).
“The claims of bribery are significant. For a long time, Mr. Adani and Modi have been inseparable. Indian journalist Paranjoy Guha Thakurta, who has written extensively about the business group, predicts that this will have an impact on India’s political economy.
This crisis also occurs at a time when Mr. Adani has been working for almost two years to repair his reputation following the 2023 report by US short-seller Hindenburg Research, which accused his company of decades of stock manipulation and fraud. Notwithstanding Mr. Adani’s denials, the accusations led to a sell-off in the market and an ongoing investigation by SEBI, India’s market watchdog.
In order to restore his reputation, Mr. Adani has been working to demonstrate that his company and its businesses had been doing well and that the earlier fraud accusations made by the Hindenburg group were untrue. “This is just a body blow coming to this billionaire who had done a very good job of shaking off the potential damage of those earlier allegations,” Michael Kugelman of the Wilson Center, an American think-tank, told the BBC. “There had been a number of new deals and investments made over the last year or so.”.
For the time being, raising money domestically for Mr. Adani’s money-guzzling projects might be difficult.
The BBC was informed by independent market analyst Ambareesh Baliga that “the market reaction shows how serious this is.”. “Despite the delays, Danis will still obtain funding for their large-scale projects. “,”.
Additionally, Mr. Adani’s plans for international expansion may be derailed by the most recent charges. A contentious energy deal and a planned takeover of an international airport have already led to challenges against him in Bangladesh and Kenya. Nirmalya Kumar, Lee Kong Chian Professor at Singapore Management University, told the BBC that “this [bribery charges] stops international expansion plans linked to the US.”.
What next? Politically, it should come as no surprise that Rahul Gandhi, the leader of the opposition, has demanded Mr. Adani’s arrest and pledged to agitate parliament. Although it is not new to bribe Indian government officials, the sums stated are astounding. I have a suspicion that some of the intended recipients’ names are in the US. The Indian political landscape may be affected by this. More is on the horizon, Mr. Kumar thinks.
Mr. Adani’s team will surely put together a superior legal defense. Mr. Kugelman states, “At this time, we only have the indictment, leaving much still to unfold.”.
Despite possible scrutiny, Mr. Kugelman says the US-India business relationship won’t likely be greatly affected, especially in light of the recent $500 million US agreement with Mr. Adani for a port project in Sri Lanka. Broader business ties between the US and India are still strong in spite of the grave accusations.
The commercial ties between the United States and India are extensive and complex. “I don’t think we should overstate the impact that this could have on that relationship, even with these very serious allegations against someone who is such a major player in the Indian economy,” Mr. Kugelman says.
Because it depends on whether the new administration permits the cases to proceed, it is also unclear whether Mr. Adani can be targeted in spite of the US-India extradition treaty. According to Mr. Baliga, the Adanis are not in dire straits. Since they are a part of highly significant and successful sectors of the Indian economy, he says, “I still do think foreign investors and banks will back them like they did post Hindenburg though.”.
“The market also believes that once the [Donald] Trump administration takes office, this will possibly go away and be resolved. “.”.
