Indian billionaire Adani, three Canadian pension executives charged with massive fraud

Indian billionaire Gautam Adani, one of Asia’s richest men, may be facing his biggest challenge yet in being indicted by US prosecutors on allegations of fraud and bribery. But it’s unclear how the case will affect his businesses and his future — and India’s economy and government.

On Friday, shares in some of the Adani Group’s companies started to pull back after falling the previous day after the charges were announced in New York. The stock prices of six of his ten listed companies rose slightly, between one percent and nearly four percent.

Adani, a major Indian player considered close to Prime Minister Narendra Modi, was charged Wednesday with securities fraud and conspiracy to defraud in a court in Brooklyn, NY.

The search for the tycoon and his multibillion-dollar empire, which includes everything from energy and ports to media and agriculture, comes after the 62-year-old founder and his holdings bounced back after losing more than $60 billion in market value. in early 2023 following allegations of stock price manipulation and fraud by short-selling firm Hindenburg Research.

It also raises questions about corporate governance and micro-capitalism in India’s economy, which Modi has vowed to make the world’s third largest, and scrutiny of the negative impact of large, family-run conglomerates. The richest man in Asia is another Indian billionaire, Mukesh Ambani of Reliance Industries.

Prosecutors allege that Adani defrauded investors in a major solar project in India by disguising it as being driven by bribes. Seven other executives with ties to Adani’s biggest business are also facing charges, including three executives from Quebec’s largest pension fund, the Caisse de dépôt et placement du Québec (CDPQ).

The indictment details a scheme that allegedly paid an estimated $265 million in bribes to government officials in India.

CDPQ executives, Cyril Cabanes, Saurabh Agarwal and Deepak Malhotra, are reportedly accused of obstructing a grand jury, the FBI, and the US Securities Exchange Commission.

The group denies the allegations against the green energy arm

The Adani Group has denied the allegations against the directors of Adani Green Energy, its renewable energy arm, as “baseless” and said it would seek legal recourse. Shares in Adani’s green energy business, which is at the center of the case, fell eight percent on Friday.

None of the people charged in the case have been arrested.

“For Adani, this is a huge attack, no matter how you cut it,” said Michael Kugelman, director of the South Asia Institute at the Wilson Center.

“His public relations machine was in overdrive for nearly two years trying to repair his reputation following the Hindenburg allegations. This case came like a bolt from the blue and quickly reversed all recent progress in saving his reputation and the corporate empire,” Kugelman said.

Adani’s imprint on the entire Indian economy runs deep. It is the country’s largest coal mining operator and infrastructure developer, operating many ports and airports, and employing tens of thousands of people. Apart from its petroleum roots, Adani has ambitions to become the world’s largest player in renewable energy by 2030.

Analysts say a key factor in his meteoric rise over the years has been his ability to align his party’s priorities with those of the Modi government, investing in key industries such as renewable energy, defense and agriculture. Before Modi, Adani was friendly with other ruling parties.

The latest controversy could put the government led by Modi’s Bharatiya Janata Party, which is seen as close to Adani, in an awkward position.

Amit Malviya, the BJP’s IT chief, said in his post to X that the US cases are “alleged and the accused are presumed innocent until proven guilty,” which critics interpreted as a show of support for the Adani group.

The main opposition has seized the controversy, calling for Adani’s arrest and accusing Modi, who has campaigned using an Adani plane, of protecting him. Opposition MPs are likely to increase pressure on Modi when the parliamentary winter session begins next week.

The dispute has already affected Adani’s overseas interests.

Kenya’s president has canceled multi-million dollar deals with the Adani group for airport development and power projects. Adani is also likely to face scrutiny in Bangladesh, where a court on Tuesday ordered an investigation into the power project.

His problems could complicate India’s relations with other countries, such as Sri Lanka, where New Delhi competes with rival Beijing for the most important markets.

There is no doubt that this is “a bad time for New Delhi,” Kugelman said, as it comes at a time “when it is trying to take advantage of the business world’s desire to outsource manufacturing to China and find other places to invest.”

Can Trump intervene?

Regarding India-US relations, some analysts believe that president-elect Donald Trump may intervene.

“India wants nothing more than for Trump to stop the investigation once he takes office. That will not happen. Trump, however, may have a good opinion of Adani, a businessman who has admired Trump a lot,” said Kugelman.

The case highlights business risks in India, although experts believe the impact on investors will be limited mainly to the Adani group.

“There is no fear of capital contagion – at the moment, the effect is focused on the group rather than the market. It may slow down the growth and development of the group as it will be more difficult for Adani to raise capital,” said Ambareesh. Baliga, an independent market analyst.

Still, for many in India, the news is less of a shock.

Investors now know “how entrenched this (bribery and corruption) is in the Indian economy – you can’t miss it,” Baliga said. “Initially, investors may stay for a while but at the end of the day, they will come back (to Adani). This is not a small or medium group that they can ignore.”