📰$265 Million

Hello. Gautam Adani is once again center stage, this time indicted by U.S. prosecutors for running a vast bribery scheme spanning several years, totaling $265 million in payments made to Indian officials. We’ll explain more, and then close with Gupshup, a round-up of the most important headlines.

Markets

Read here for an appendix on the above.

Analysis

Adani’s Big Bribery Case

Gautam Adani is once again center stage, this time indicted by U.S. prosecutors for running a vast bribery scheme spanning several years, totaling $265 million in payments. The allegations suggest that Adani’s companies funneled millions of dollars in illicit payments to secure lucrative contracts and favorable policies, creating significant reputational risks for his business empire and raising questions about governance in India.

Allegations

Adani’s companies allegedly employed offshore entities to channel bribes aimed at influencing tender processes in coal mining and power generation. According to U.S. prosecutors, the group secured favorable outcomes by offering kickbacks to officials, gaining access to lucrative coal block auctions and energy contracts. In particular, several SubCos of Adani Power had rapid success with local JVs and government contracts which led to increased revenue. 

The coal sector, a cornerstone of Adani's empire, is crucial to India's energy landscape but also a focal point of controversy for its environmental and social impact. The indictment further claims that Adani entities manipulated contracts for renewable energy projects, undermining competitive bidding processes. This is particularly damaging given India's global commitments to renewable energy transitions, where Adani Green Energy Limited plays a significant role. Investigators allege that contracts for wind and solar projects were steered toward Adani-controlled entities through illicit means, leveraging close political connections.

Key Industries Involved

1. Coal Mining and Power Plants:

   • Adani Power Limited is India's largest private power producer, with coal-fired plants forming a significant part of its portfolio. U.S. prosecutors outlined that bribes helped Adani entities secure mining blocks at undervalued prices while evading regulatory scrutiny.

   • Whistleblowers highlighted discrepancies in coal import invoices, suggesting over-invoicing schemes to inflate costs and siphon funds offshore.

2. Renewable Energy Projects:

   • Adani’s rapid expansion in solar and wind energy—an essential part of India's renewable targets—was allegedly tainted by underhanded dealings. The company’s involvement in India’s green energy auctions has faced criticism for a lack of transparency.

3. Port and Infrastructure Development:

   • Contracts related to port developments, particularly at Mundra (Adani’s flagship port), are also under the spotlight. Prosecutors pointed to payments routed through shell companies to secure regulatory clearances for projects that required environmental approvals.

Adani and his companies deny any wrongdoing.

Macro

• India’s foreign reserves plunged by $17.76 billion last week to $657.9 billion, marking their steepest drop on record, as the central bank likely intervened to stabilize a rupee that hit an all-time low of 84.5013. The decline reflects continued pressure on the currency amid foreign outflows and uncertainty following the U.S. elections. (BBG)

Equities

• India’s benchmark indexes, the NSE Nifty 50 and BSE Sensex, surged over 2.4% on Friday, marking their strongest performance since early June and breaking a two-week losing streak. Gains were driven by banks and Reliance Industries, pushing the Nifty to 23,907.25 and bolstering its 10% year-to-date rise despite recent volatility. (BBG)

• Adani Group stocks rebounded on Friday, with six out of ten companies, including Adani Enterprises and Adani Ports, ending higher after a $27 billion market value wipeout following bribery charges against founder Gautam Adani. Despite the recovery, Adani Green Energy continued to slide, extending its steep losses from the previous session. (BBG)

• Sony India has secured exclusive media rights for all Asian Cricket Council tournaments through 2031, in a deal valued at $170 million, according to a source. Notably, Disney and Reliance, previously seen as likely bidders, chose not to participate, as the media sector undergoes consolidation following their $8.5 billion asset merger. (Reuters)

Alts

• Adani Group’s green energy arm faces significant refinancing challenges in the near term, with CreditSights highlighting liquidity and credit weaknesses as key concerns. Analysts noted that funding channels for the conglomerate are likely to tighten, particularly after its founder Gautam Adani was indicted by U.S. prosecutors. Adani Green Energy Ltd., which recently canceled a $600 million bond sale intended to repay foreign-currency loans, holds approximately $2 billion in short-term project debt. (BBG)

Policy

• India’s markets regulator, SEBI, has proposed stricter hiring rules for key positions at market institutions like stock exchanges and depositories. The plan includes involving independent external agencies to recommend candidates for roles such as compliance, risk, and technology officers, with final decisions requiring board approval and SEBI input. (Reuters)

• India's market regulator, SEBI, has proposed diversifying the ownership of equity clearing corporations, which are currently fully owned by stock exchanges. The move aims to enhance their financial and operational independence, ensuring they prioritize public interest. (Reuters)

See you Monday.

Disclaimer: This is not financial advice or recommendation for any investment. The Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice.

1 USD = 84.43 Indian Rupee