https://www.straitstimes.com/asia/south-asia/adani-bribery-allegations-raises-question-of-trust-in-indias-corporate-sector
Adani bribery allegations raise question of trust in India’s corporate sector
NEW DELHI – Calls for accountability are mounting against the Modi government from the opposition in the wake of the US bribery and fraud allegations against the Adani Group, as the business community and global trade partners watch how India handles the reputational fallout.
The government has distanced itself from the corruption scandal engulfing Asia’s second-richest man Gautam Adani, 62, who is perceived to be close to Prime Minister Narendra Modi.
The US Department of Justice (DOJ) on Nov 20 alleged that Adani and his associates, including from another firm called Azure Power, agreed to pay Indian officials bribes of over US$250 million (S$335 million) to secure their commitment to buying solar energy from “one of the world’s largest solar energy projects”.
This refers to a 12-gigawatt solar power project the government awarded Adani Green Energy and Azure Power Global in 2020.
The scandal has cast a long shadow over India’s business and political landscapes.
Parliamentary proceedings ground to a halt for several days amid demands for a debate on the US allegations from the opposition, which has accused the Indian government of shielding Adani and his empire.
Mr Modi has been courting foreign investors by vaunting India as a stable alternative to China amid mounting tensions between Beijing and the US, but the scandal has sparked concerns about corporate governance and business practices in the world’s fastest-growing major economy.
“The world is watching. How India addresses this issue will set a precedent for years to come,” said Mr Rishi Sahai, managing director of Cogence Advisors, a boutique investment bank.
“The mood is still cautiously optimistic, as corporates are going after global investors with the proposition that the Adani indictment is an aberration and that the India story is a great long-term investment proposition,” he added.
Damage control
In the first comments from the government, Ministry of External Affairs spokesman Randhir Jaiswal on Nov 29 termed the allegations against the Adani Group a “legal matter involving private individuals and private entities and the US Department of Justice”.
He said that the government had not received any requests from the US for Adani’s arrest.
The US charged Gautam Adani; his nephew Sagar Adani, 30; and senior executive Vneet Jaain with securities and wire fraud, and substantive securities fraud, in relation to over US$3 billion raised between 2020 and 2024 through loans and securities.
The men have been accused by the DOJ and US Securities and Exchange Commission of conspiring to use false statements to conceal corrupt schemes to mislead US investors and global banks.
The sales contracts were expected to bring Adani Green Energy some US$2 billion in profits over a 20-year period.
Five other senior business executives were also charged with conspiracy to violate the Foreign Corrupt Practices Act (FCPA) in connection with the bribery scheme allegedly perpetrated by Gautam Adani, Sagar Adani and Jaain involving one of the world’s largest solar energy projects. The Act bars US-linked entities from bribing foreign officials.
Adani Green Energy said on Nov 27 that while allegations of securities and wire fraud have been levelled against the three men, no charges were related to bribery or the FCPA.
It also said none of the five executives charged with conspiracy to violate the FCPA is an Adani executive.
The Adani Group has denied the bribery allegations as “baseless” and earlier said it would take all necessary legal recourse.
Its chief financial officer Jugeshinder Singh also played damage control on Nov 23, stressing that none of the group’s 11 public companies is implicated in or accused of any wrongdoing.
The allegations in the US indictment relate to “one contract of Adani Green, which is roughly 10 per cent of (the) overall business of Adani Green”, he said on X.
“In today’s world negativity spreads faster than facts...and as we work through the legal process, I want to re-confirm our absolute commitment to world class regulatory compliance,” Gautam Adani said on Nov 30 in Jaipur in his first comments since the US announced the charges.
Adani has been given 21 days to answer US SEC allegations, but any trial would be a long way off. While the Adani Group has maintained that no quantum of punishment was underlined in the indictment, if convicted, he and other executives could be looking at years in prison as well as financial penalties.
Senior lawyer Mukul Rohatgi, a former attorney-general of India who has represented the tycoon and his conglomerate in the past, noted on Nov 27 that the US prosecutors’ indictment was based on claims, not proven facts.
“I do not find a single name or detail in the charge sheet as to who has been bribed, in what manner, and which department he belongs to,” he added.
Business ramifications
The Gujarat-based Adani Group has an outsize footprint in the country. Its businesses include sea and airport management; electricity generation and transmission; mining; natural gas; food; weapons and infrastructure.
Adani Enterprises, the group’s main company, posted revenue of US$11.6 billion in the year to March 31.
The indictment triggered significant fallout for the Adani Group.
Reuters reported that Andhra Pradesh, one of several states named in the case, is reportedly likely to suspend a power supply contract linked to the group. Other states like Tamil Nadu have denied any direct dealings with it.
French energy major TotalEnergies – which has a 20 per cent stake in Adani Green – said on Nov 25 that it would not infuse “any new financial contribution” until the US indictment and its consequences have been clarified.
The Adani Group clarified later that this would not have any impact on its operations or growth plans, as “there is no new financial commitment under discussion with TotalEnergies”.
Analysts said the government needed to restore trust in the Indian system.
“They will have to do some outreach to countries,” said Indian journalist and columnist Neerja Chowdhury. “After all, Kenya has cancelled projects. The signal to some countries has been a negative one.”
S&P Global Ratings said the allegations could also renew questions over the group’s governance practices.
“We will watch for any signs of weaker funding access or concerns from existing lenders – which could be demonstrated by the lowering of funding limits, non-renewal of facilities, or significantly higher credit spreads,” it said in a note.
Indian companies have been increasingly raising funds overseas, leveraging foreign investor interest in the world’s fastest-growing major economy. S&P projects India’s gross domestic product growth to come in at 6.8 per cent for 2024-25.
While the Adani Group decided to put off a US$600 million bond offering, it has also sought to reassure investors, maintaining that it has enough cash flows to service debt obligations in its half-year financial report released on Nov 25.
Political reverberations
These allegations against the Adani Group have also reverberated through India’s political landscape.
The ruling party has accused the opposition of using the case to tarnish the image of the Prime Minister.
The ruling Bharatiya Janata Party has said that it is up to the Adani Group to fight its battles. “The law will take its own course,” the party’s spokesman said.
Over in the US, whether the incoming Trump administration – which views ties with India as important in the context of tensions with China – will proceed with the indictment remains uncertain, analysts noted.
On the one hand, US President-elect Donald Trump is known to share a good rapport with Mr Modi.
“We can speculate whether under Trump, the SEC and DOJ will adopt a different line,” Indian journalist and documentary maker Paranjoy Guha Thakurta said.
While congratulating Trump on his election win in early November, Gautam Adani said on X that he would create 15,000 jobs in the US through an investment of US$10 billion in energy and infrastructure projects.
On the other hand, how the indictment proceeds depends on Trump’s priorities, said Mr Robinder Sachdev, president of New Delhi-based The Imagindia Institute think-tank.
“When he comes to power, he will have so many issues that need to be handled.”
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