Indictment of Gautam Adani and others by US prosecutors calls for an investigation

With the indictment of Gautam Adani, his nephew Sagar Adani and six others by US prosecutors in an alleged bribery case, the Adani Group faces another set of questions that strike at the heart of its corporate governance. This comes after Hindenburg Research, a US-based firm, had accused the Group of engaging in “accounting fraud” and “stock market manipulation” last year. Following news of the indictment, shares of the Adani Group companies tanked — Adani Enterprises ended the day down 23.4 per cent, Adani Green Energy fell 18.95 per cent, Adani Power 9.6 per cent and Adani Ports 13.2 per cent. The Group has also scrapped its $600-million bond offering. The indictment levies multiple charges, ranging from conspiracy to violate the Foreign Corrupt Practices Act to securities and wire fraud, and conspiracy to obstruct justice. The accusations of financial malfeasance come days after Ajit Pawar, the deputy Chief Minister of Maharashtra, claimed — in the run-up to the state election — that Gautam Adani was part of talks between the BJP and NCP on government formation five years ago. This only goes to reinforce concerns over the blurring of lines between this Group and the political establishment.

The indictement alleges that bribes of around Rs 2,029 crore were offered and promised to government officials for securing “lucrative solar energy supply contracts” with state discoms. The matter is said to involve the states of Odisha, Jammu and Kashmir, Tamil Nadu, Chhattisgarh and Andhra Pradesh, and the Solar Energy Corporation of India, a government-owned company, with whom these states signed the power sale agreement under the manufacturing linked project. These power contracts were expected to generate more than $2 billion in profits after tax for the Adani Group over the coming two decades. As per the indictment, extensive documentation was maintained on the bribery efforts. US authorities have also claimed that some of the letters sent by the parties involved in the case to the Indian stock exchanges are false.

In the past, questions have been raised over investigations by the Indian stock market regulator into some of the allegations that have been raised against the Adani Group — Hindenburg had previously sought to draw links between what it perceived as regulatory inaction to the Sebi chairperson’s investments. With Parliament days away, the indictment raises questions that need to be answered. Considering that the ripple effects of what happens to the Adani Group can be felt in stock markets and the broader economy — the Adani Group is one of the country’s largest conglomerates, with its business interests spanning a gamut of sectors, from ports, airports, power, including renewables, cement to media among others — all the concerned regulators now need to investigate the allegations raised in a transparent and time-bound manner. The BJP spokesperson’s claim that this could be part of an “international structure” out to undermine the Indian markets isn’t a persuasive answer — it insults the intelligence of the Indian investor.