-By C K Neeha Reddy
INTRODUCTION
The Adani Group, one of India’s largest conglomerates, is facing an unprecedented crisis after a U.S. court and the SEC heaped bribery and corruption charges on it. Accusations by the U.S. court and the SEC have led to monumental losses in market capitalization, battered stock prices, and an intense global media glare. Spread across infrastructure, energy, and mining, this group has stakes in ambitious ventures such as Dharavi Redevelopment and Khavda Solar projects, both of which are facing delays and funding issues. Its larger stakeholders, like LIC and GQG, have also been affected, thereby raising questions over the stability of its portfolios. This chaos triggers vulnerability within the Adani empire as legal and ethical controversies attack its image, financial soundness, and global operations.
CURRENT SITUATION OF ADANI GROUP
On 21 November 2024, a US court indictment accusing Adani Group and its Chairman Gautam Adani of bribing the officials of paying $265 million to the Indian Government, primarily in Andhra Pradesh to win contracts for Adani Green and Azure Power led to a severe market erosion. The contracts are projected to generate profits exceeding $2 billion over 20 years.
While specific names of additional officials involved have not been disclosed, the allegations suggest that multiple state electricity distribution companies across various Indian states were implicated in the bribery scheme. Prosecutors indicated that details of the alleged bribes were documented on mobile devices by Sagar Adani and another associate, including photographs of documents showing bribe amounts.
The charges include violations of the Foreign Corrupt Practices Act, securities fraud, and conspiracy. The U.S. Securities and Exchange Commission (SEC) has also filed civil charges against the Adanis, seeking financial penalties and restrictions on their ability to hold officer roles in publicly traded companies. Following the announcement of these allegations, Adani Group's market value plummeted by approximately $28 billion, leading to significant declines in stock prices across its listed companies that include Adani Enterprises, Adani Wilmar, Adani Ports and SEZ, Adani Green Energy, and Adani Total Gas.
Regulatory response to Adani’s Group:
SEBI Inquiry: SEBI launched a preliminary inquiry into whether Adani Group had violated disclosure norms, including its failure to disclose the U.S. Department of Justice investigation into allegations of bribery. SEBI asks stock exchanges for clarifications about possible breaches of listing obligations and will take it further to a full-fledged formal inquiry if required based on this preliminary assessment.
ED Involvement: The ED is likely to investigate the possible money laundering dimension of the bribery case as a common area of financial crimes handled by the ED. It would seek to trace any such ill-gotten gains arising from the alleged bribe amounts.
Impact on Adani Group on November 21
Adani Enterprises closed at ₹2182.55 on November 21, 2024; it is down by 23.44%, almost reaching its 52-week low, reflecting high volatility and investor fear amid the allegations.
Adani Ports & SEZ's stock plunged 10% to ₹1160.70 on November 21, erasing ₹38,000 crore from its market cap, as groupwide losses of ₹2.6 lakh crore mounted amid serious allegations.
Adani Wilmar's stock slid poorer, falling to an all-time low of about ₹294.40 from a base of 10%. The analysts say the stock could face further bearish pressure, making for a difficult situation for Adani Wilmar amid the ongoing turmoil within the group.
Adani Power's stock plunged by a whopping 11.56%, closing at around ₹430.85. The stock gapped down by 15.86% at the opening and touched the intraday low of ₹430.15, indicating extreme volatility.
Adani Green Energy stock shed 17.97% while closing at ₹1,158. It had dropped 18.54% on the day, showing deep investor concern and a worse performance than the larger market.
Impact on Major Projects of Adani Group
Khavda Solar Project: The $2.26 billion Khavda Solar Project will illuminate 18 million homes and generate 15,200 jobs, but US allegations of bribery against the Adani Group hang like a dark cloud over the project. It is at risk of delay, increased borrowing costs, or complicated agreements in foreign funding, halting this progressive undertaking towards achieving India's renewable energy goals.
Mundra Solar Manufacturing Facility: Adani Solar's key project-the Mundra Facility-which could be crucial for India's renewable pursuit, has been criticized due to corruption allegations and discourages foreign investment. ₹2 lakh crore Market cap loss and stock dip of 10-20% in overall investor concern. Plans and financial risks now weigh down on the expansion that is planned for the facility complicating its future operational life.
Dharavi Redevelopment Project: Allegations of favoritism, fraud, and tender irregularities against the Adani Group have clouded the $3 billion Dharavi Redevelopment Project. Claims by the opposition and financial headaches, including a loss of $27 billion to the market value and soaring borrowing costs, are now threatening fundraising as well as resident relocation work, jeopardizing the vision for Asia's largest slum.
Carmichael Coal Mine: The Carmichael Coal Mine, owned by Adani's Bravus Mining & Resources in Queensland. It is approximately 160 kilometres northwest of Clermont and began operations in December 2021. Allegations against the Adani Group encompass human rights complaints and charges of corruption that could potentially limit its major projects going forward in Australia. The recent complaint filed by the Nangana Yarrbayn Wangan & Jagalingou Cultural Custodians asserts racial discrimination and hindrance of Indigenous access to sacred land, which would further aggravate scrutiny of Adani's operations, particularly in terms of the Carmichael Coal Mine. Initially projected to produce 60 million tonnes of coal annually, it was downsized to 10 million tonnes because of the allegations against the Adani Group. As it gains more legal battles and fiercer resistance from environmental and Indigenous rights activists, the Carmichael Coal Mine and Adani's overall ventures in Australia are uncertain.
Impact on Investors
LIC: November 21, 2024: LIC lost ₹12,000 crore ($920 million) in Adani shares. Its portfolio value slid from ₹55,694 crore to ₹47,847 crore. Sharp declines indicate volatility and risks tied to significant holdings in Adani firms. Losses to that extent raise concern for policyholders and LIC's investment stability as a major institutional investor.
GQG: GQG invested 80,000 crore in Adani firms. It initially gained $5 billion from them. However, bribery charges against Gautam Adani caused a 20% decline in his share. Now it is raising concerns about GQG's exposure. Though 90% of its assets are unconnected with Adani, it has incited GQG to reconsider its investments and contemplate strategic adjustments.
SBI: SBI's ₹27,000 crore exposure to Adani, just 0.88% of its loans, is under focus due to bribery allegations that have seen shares fall by 7%. While the high-value secured loans come without any risk premium, growing NPAs and RBI supervisions will drift SBI toward stricter lending practices, particularly in high-risk sectors, in the interest of maintaining stability.
In conclusion, a crisis of confidence has engulfed the Adani Group, once an epitome of India's fast-paced industrialization. Corruption charges and market turmoil have brought flagship projects such as Dharavi Redevelopment and Khavda Solar in its way. Investor confidence has been rattled with concerns voiced over corporate governance and transparency, something that LIC, GQG, or even SBI will voice their concerns on. Behind each of these mayhem-based incidents are financial losses, regulatory scrutiny, and investor panic. This is the urgent reason why ethical business practices have to be restored so that Adani can truly be as bright as it claims its future to be.
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