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Mr Adani's sprawling $169 billion empire expands into ports and renewable energy
Just a few weeks ago, Gautam Adani, one of the world's richest men, celebrated Donald Trump's election victory and announced plans to invest $10bn (£7.9bn) in energy and infrastructure projects in the United States.
Now the 62-year-old Indian billionaire and close ally of Prime Minister Narendra Modi, whose sprawling $169 billion empire spans ports and renewable energy, faces fraud charges in the United States which could potentially jeopardize its ambitions at home and abroad.
Federal prosecutors accused him of orchestrating a $250 million bribery scheme and hiding it to raise money in the United States. They allege that Mr. Adani and his executives paid bribes to Indian officials to obtain contracts worth $2 billion in profits over 20 years. Adani Group has denied the allegations, calling them “baseless”.
But this is already harming the group and the Indian economy.
Adani Group companies lost $34 billion in market value on Thursday, reducing the combined market capitalization of its 10 companies to $147 billion. Adani Green Energy, which is the company at the center of the allegations, also said it would not proceed with a $600 million bond offering.
Then there are questions about the impact of these accusations on Indian affairs and politics.
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Mr. Adani, the 62-year-old Indian billionaire, is a close ally of Prime Minister Narendra Modi.
India's economy is deeply intertwined with that of Mr. Adani, the country's leading infrastructure tycoon. It operates 13 ports (30% market share), seven airports (23% of passenger traffic) and India's second largest cement company (20% market).
With six coal-fired power plants, Mr. Adani is the largest private player in India's power sector. At the same time, it has committed to investing $50 billion in green hydrogen and is managing an 8,000 km (4,970 miles) long gas pipeline. He is also building India's longest highway and redeveloping the country's largest slum. It employs more than 45,000 people, but its businesses reach millions of people nationwide.
Mr Adani's global ambitions span coal mining in Indonesia and Australia, airport and energy projects in Kenya and Morocco. The group plans to spend more than $1 billion on infrastructure projects in Tanzania and Kenya.
Mr Adani's portfolio closely reflects Modi's policy priorities, starting with infrastructure and more recently extending to clean energy. He has thrived despite criticism calling his business empire crony capitalism, highlighting his close ties to Modi, both as chief minister of Gujarat – where they both hail from – and as prime minister of India. (Like any successful businessman, Mr. Adani has also established ties with many opposition leaders, investing in their states.)
“This (corruption allegations) is important. Mr. Adani and Modi have been inseparable for a long time. This will influence the political economy of India,” says Paranjoy Guha Thakurta, an Indian journalist who has written extensively about the business group.
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Adani Group companies lost $34 billion in market value on Thursday
This crisis also comes as Mr Adani has spent almost two years trying to rebuild his image after US short seller Hindenburg Research's 2023 report accused his conglomerate of decades of stock manipulation and fraud. Although Mr. Adani denied the claims, the allegations triggered a market sell-off and an ongoing investigation by India's market regulator, SEBI.
“Mr. Adani tried to rehabilitate his image and show that the allegations of fraud previously made by the Hindenburg Group were not true and that his company and operations were doing quite well. A number of new deals and investments have been made over the past year, and so this is just a blow to this billionaire who has done a very good job of ridding himself of the potential damage of these allegations previous ones. ” Michael Kugelman of the Wilson Center, a US think tank, told the BBC.
For now, raising capital in the country may prove difficult for Mr. Adani's cash-intensive projects.
“The market reaction shows how serious the situation is,” Ambareesh Baliga, an independent market analyst, told the BBC. “Adanis will continue to obtain financing for its major projects, but with delays.”
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Mr. Adani faced difficulties in Kenya following a proposed takeover of an international airport
The latest accusations could also put a damper on Mr Adani's global expansion plans. It has already been challenged in Kenya and Bangladesh over a proposed takeover of an international airport and a controversial energy deal. “These corruption charges put an end to international expansion plans linked to the United States,” Nirmalya Kumar, Professor Lee Kong Chian at the Singapore Management University, told the BBC.
What's next? On the political front, opposition leader Rahul Gandhi unsurprisingly called for Mr Adani's arrest and promised to stir up Parliament. “Corruption of government officials in India is not new, but the amounts mentioned are staggering. I suspect the United States has the names of some of the intended recipients. This could have repercussions on the Indian political scene. There is still a lot to come,” believes Mr. Kumar.
Mr. Adani's team will undoubtedly provide a leading legal defense. “Right now we only have the indictment, which leaves a lot more to be revealed,” Mr. Kugelman said.
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Opposition leader Rahul Gandhi called for Mr Adani's arrest.
Although the US-India trade relationship may come under scrutiny, it is unlikely to be significantly affected, especially given the recent US$500 million deal. dollars with Mr. Adani for a port project in Sri Lanka, Mr. Kugelman said. Despite these serious allegations, broader trade ties between the United States and India remain strong.
“The trade relationship between the United States and India is very broad and multifaceted. Even with these very serious allegations against a major player in the Indian economy, I don't think we should overestimate the impact that this could have on that relationship,” Mr. Kugelman said.
Additionally, it is unclear whether Mr. Adani may be targeted, despite the U.S.-India extradition treaty, as it depends on whether or not the new administration authorizes the prosecution. business. Mr. Baliga believes that this is not a disaster for the Adanis. “I still think foreign investors and banks will support them as they did after Hindenburg, given that they are part of very important and successful sectors of the Indian economy,” he says.
“There's also a sense in the market that maybe this will sort itself out and be resolved once the (Donald) Trump administration takes over.”
