Adani's US indictment rattles stocks, Kenya spikes airport deal

Indian billionaire Gautam Adani has been indicted for fraud by US prosecutors and arrest warrants issued for him and his nephew for their alleged roles in a $265 million scheme to bribe Indian officials to secure power-supply deals.

The crisis is the second in two years to hit the ports-to-power conglomerate founded by Adani, 62, one of the world’s richest people. The fallout was felt immediately, as billions of dollars were wiped off the market value of Adani Group companies and Kenya’s president canceled a massive airport project with the group.

Adani Group said in a statement that the allegations made by the U.S. Department of Justice and by the U.S. Securities and Exchange Commission (SEC) in a parallel civil case were “baseless and denied,” adding that it would seek “all possible legal recourse.”

U.S. authorities said on Wednesday that eight people, including Adani and his nephew Sagar, agreed to pay about $265 million in bribes to Indian government officials to obtain contracts expected to yield $2 billion of profit over 20 years, and to develop India’s largest solar power plant project.

Adani Group companies lose $27 billion after US indictment

It is unclear whether Gautam or Sagar Adani will appear in court, as they could try to get the indictment dismissed without appearing in the United States. Gautam Adani’s whereabouts are unclear, and none of the defendants are in custody, a spokesperson for U.S. Attorney Breon Peace in Brooklyn said.

Kenyan President William Ruto said on Thursday he ordered the cancellation of a procurement process that was expected to hand control of the country’s main airport to Adani Group in a deal worth nearly $2 billion.

Following the news, Adani Green Energy, the company at the center of the case, canceled a scheduled $600 million U.S. bond sale.

SOLAR POWER PLANT

U.S. authorities said the Adanis and Adani Green Energy’s former CEO Vneet Jaain had raised more than $3 billion in loans and bonds by hiding their corruption from lenders and investors.

U.S. law bars foreign companies who raise money from U.S. investors from paying bribes overseas to win business. It is also against U.S. law to raise money from investors on the basis of false statements.

According to prosecutors, Adani Green Energy raised money from U.S. investors and submitted financial documents falsely stating that it had not paid any government officials to secure an improper advantage.

Gautam Adani is worth $69.8 billion, according to Forbes magazine, making him India’s second-richest person after Mukesh Ambani.

Sagar Adani is an executive director at Adani Green Energy and oversees its “strategic and financial matters.”

Gautam Adani, Sagar Adani and Jaain did not respond to Reuters requests for comment.

Each was charged with securities fraud, securities fraud conspiracy and wire fraud conspiracy, and the Adanis were also charged in the SEC civil case.

“Gautam and Sagar Adani were engaged in the bribery scheme during a September 2021 note offering by Adani Green that raised $750 million, including approximately $175 million from U.S. investors,” the SEC said.

“The Adani Green offering materials included statements about its anti-corruption and anti-bribery efforts that were materially false or misleading in light of Gautam and Sagar Adani’s conduct,” it added.

Another company allegedly involved in the scheme, Azure Power, was delisted from the New York Stock Exchange last November.

Adani Group shares were hit hard in January 2023 after short-seller Hindenburg Research issued a report that accused it of using offshore tax havens improperly, which Adani Group denied.

Following Wednesday’s indictment, Hindenburg said in a statement that “since releasing our January 2023 report identifying Adani as the largest corporate con in history, we have never wavered in our view, nor has Adani ever refuted our findings.”

The group’s market value had been $235 billion before Hindenburg’s report sparked an approximately $150 billion meltdown.

ADANI GROUP SAYS IT COMPLIES WITH LAWS

Arrest warrants have been issued in the United States for Gautam and Sagar Adani and U.S. prosecutors plan to hand those warrants to foreign law enforcement, U.S. court records show.

The defendants may seek to dismiss the indictment without appearing in person or being extradited pursuant to India’s treaty with the United States.

Prosecutors would oppose such a move, and a judge would review the merits before a possible trial. Prosecutors could also add more charges later, or defendants could plead guilty to some but not all charges they face.

In a statement, the Adani Group said: “The Adani Group has always upheld and is steadfastly committed to maintaining the highest standards of governance, transparency and regulatory compliance across all jurisdictions of its operations.

“We assure our stakeholders, partners and employees that we are a law-abiding organization, fully compliant with all laws,” it added.

SHARES, BONDS SLUMP

Adani Group companies collectively lost about $27 billion in value in Thursday’s trade in India, reducing their combined market capitalization to about $142 billion.

Shares in Adani Green Energy plunged 19% and stocks for many other firms in the conglomerate, including flagship Adani Enterprises, lost more than 10%.

Adani dollar bonds slumped, with prices down between 3-5c on bonds for Adani Ports and Special Economic Zone.

Indian authorities, including the Securities and Exchange Board of India (SEBI) did not respond to requests for comment. An SEBI probe in the wake of the Hindenburg report is ongoing.

Azure said it had been cooperating with U.S. authorities, and people named by them left the company more than a year ago.

Indian opposition parties that have long complained that Adani and his conglomerate have been treated favorably by Prime Minister Narendra Modi’s government called for an investigation into allegations of wrongdoing. Modi and Adani, both from the western state of Gujarat, have denied impropriety.