New Delhi: The past eight days have seen the Adani Group lose about Rs 3 lakh crore in market capitalisation over 48 hours, only to recover more than Rs 1.4 lakh crore of this in the last three days. In the intervening time, the group has seen business partners and banks review their arrangements with it, governments pull out of potential deals, and ratings agencies place its companies on a “negative outlook” watch.
The same period has also seen the Adani Group mount a strong financial and legal defence —which is what led to the recovery in its market capitalisation on the back of a jump in Adani stock prices—as well as several governments and agencies expressing faith in the company.
The trigger for all this were two indictments—by the US Department of Justice (DOJ) and US Securities and Exchange Commission (SEC)—on 20 November, which alleged that Adani Group chairman Gautam Adani, his nephew and Adani Green Energy (AGEL) Executive Director Sagar Adani, AGEL MD and CEO Vneet Jaain, and several others had been involved in various crimes, including bribery of Indian government officials, wire fraud, and securities fraud.
Adani fights back, with a little help from friends
On Monday, the Adani Group made a presentation to its investors, in which it highlighted its financial strength, saying that it had enough cash reserves and profits to not only service its debt obligations but also finance its growth.
“Adani portfolio companies have sufficient liquidity to cover all debt servicing requirements for at least 12 months. As of September 30, 2024, Adani portfolio companies had cash of Rs 53,024 crore, which was close to 21 per cent of its total gross debt outstanding,” the group said in a note to investors.
The group followed this up with a statement to stock exchanges Wednesday, in which it asserted that the US indictments charged none of its executives with either violations of the US Foreign Corrupt Practices Act (FCPA) or for obstructing justice.
The group did acknowledge the other charges, however. “These directors have been charged on three counts in the criminal indictment namely (i) alleged securities fraud conspiracy, (ii) alleged wire fraud conspiracy, and (iii) alleged securities fraud,” the statement said.
The same day, former Attorney General and senior counsel Mukul Rohatgi addressed a press conference on the matter “in his personal capacity”, in which he reiterated the Adani Group’s position.
These statements came a day after Abu Dhabi-based conglomerate International Holding Company (IHC) said that its outlook on its Adani Group investments remained unchanged by the recent developments. IHC currently owns a little more than 5 percent stake in Adani Enterprises, Adani Group’s flagship company.
In addition, Tanzania Ports Authority Director General Plasduce Mbossa Wednesday told Reuters that the country plans to honour its contract with the Adani Group. According to reports, Tanzania had in May entered into a 30-year concession agreement with Adani Ports to operate a container terminal in Dar es Salaam port.
Israel, too, has downplayed the impact of the indictments on its business relationship with the Adani Group. Israeli ambassador Reuven Azar said Thursday that the allegations by US authorities were “not something that’s problematic” as far as Israel was concerned, adding that he wished the Adani Group and all Indian companies continued to invest in Israel.
Ratings agency Crisil has also come out strongly in favour of the Adani Group.
“Despite recent legal developments, including a US indictment followed by materially false and misleading coverage, the agency has maintained a positive outlook on the group’s companies and entities,” Crisil said in a bulletin Friday. “Adani Group has sufficient liquidity and operational cash flows to meet its debt obligations and committed capex plans over the medium term.”
The Adani Group listed companies lost Rs 2.6 lakh crore in market capitalisation on 21 November, when the indictments became public, and extended this loss by another Rs 35,000 crore a day later. This took the total market cap loss to almost Rs 3 lakh crore in two days.
However, Adani’s defence and the fact that a few governments spoke up in favour of the group has meant a resurgence of stock market investors’ confidence in its stocks. The Adani Group’s consolidated market capitalisation increased by Rs 1.2 lakh crore Wednesday, and by another Rs 24,000 crore by the end of trading Friday.
Not everything has worked out, though
The last week has also seen several announcements that could potentially hurt the Adani Group, including actions by ratings agencies, foreign governments, and some business partners.
French company TotalEnergies, for example, Tuesday said that it would be pausing fresh investments in the Adani Group until there was clarity on the US indictments. TotalEnergies has a 19.8 percent stake in AGEL, the main Adani company linked to the US indictments.
Similarly, the US government’s Development Finance Corporation (DFC) has said it is “actively assessing the ramifications” of the DOJ indictment.
The development agency had last November said it would provide $553 million in financing for a port terminal project in Colombo, which is partly owned by the Adani Group.
“DFC is aware of the recent allegations related to Adani and is actively assessing the ramifications in light of the recent DOJ announcement,” it told ThePrint in an emailed statement. “We are committed to ensuring that our projects and partners uphold the highest standards of integrity and compliance.”
“The project has not reached financial closure or signed a loan agreement,” DFC added. “We continue to conduct due diligence to ensure that all aspects of the project meet our rigorous standards before any loan disbursements are made.”
This comes on the heels of the Kenyan government saying it was cancelling $2.5 billion worth of airport and power transmission deals with the Adani Group, and the Bangladesh government saying it would review the power generation contracts signed by the previous Sheikh Hasina government, including one with the Adani Group.
ThePrint has also learnt that the Adani Group’s plans to invest in the Philippines could now face further scrutiny from domestic regulators following the US indictments.
While Crisil commented favourably on the Adani companies, other ratings agencies have not been as positive. Fitch Ratings has placed several Adani Group bonds on watch for a potential downgrade, while Moody’s has cut its outlook on bonds issued by seven Adani entities to “negative”.
(Edited by Nida Fatima Siddiqui)
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