US prosecutors indicted billionaire tycoon Gautam Adani for paying $265 million in bribes to Indian officials to secure solar energy contracts, rocking the conglomerate the second time in less than two years and sending stocks of group companies crashing and wiping off $26 billion in market capitalisation.

A five-count criminal indictment was filed at a federal court in Brooklyn charging Gautam Adani, his nephew Sagar Adani, Vneet  Jaain and several others, for their role in a multi-billion dollar scheme to obtain funds from US investors and global financial institutions on the basis of false and misleading statements.

3 Others charged

The US Securities and Exchange Commission also said it was charging three senior executives under the Foreign Corrupt Practices Act in two actions for alleged bribery involving Adani Green Energy and Azure Power.

“These offences were allegedly committed by senior executives and directors to obtain and finance massive state energy supply contracts through corruption and fraud at the expense of US investors,” said US Deputy Assistant Attorney General Miller. “The Criminal Division will continue to aggressively prosecute corrupt, deceptive, and obstructive conduct that violates US law, no matter where in the world it occurs.” 

An Adani group spokesperson denied the allegations and said it was baseless, and all legal recourse will be sought. “The charges in the indictment are allegations and the defendants are presumed innocent unless and until proven guilty,” it said.

The immediate fallout of this was Adani Green, the renewable energy company at the centre of the scandal, abandoned its plan to issue US dollar-denominated bonds to raise $600 million in the near term for several projects.

The charges

According to the 54-page document by the US Department of Justice, between 2020 and  2024 Adani and six other executives  participated in the bribery scheme.

Between December 2019 and July 2020, Adani Green and its subsidiary received letters of award for a manufacturing linked solar tender floated by the Solar Energy Corporation of India (SECI), to supply 12 GW solar power.

 SECI had the responsibility to find purchasers for the power among State electricity discoms but failed to do so due to the high tariffs. The indictment said that at this juncture Adani and other officials concocted the scheme to bribe Indian government officials, in exchange for them to arrange power sale agreements between SECI and the discoms. It said that following the promise of bribes discoms in Odisha, J&K, Tamil Nadu, Chhattisgarh, and Andhra Pradesh entered into PSAs with SECI.

US prosecutors said that Gautam Adani personally met with Indian authorities to implement the bribes, while the conspirators met in person and communicated through a messaging platform to discuss the execution of the plan.

The conspirators made extensive electronic documentation of their efforts, including PowerPoint and excel presentations to evaluate the best form of payments. It also accused them of destroying evidence to hide their participation in the scheme, while using code names to refer to each other such as “V,” “snake”,  and “numero uno minus one.” Adani was referred to as “Mr A,” “numero uno” and “the big man.”

Stocks take a beating

Stocks of Adani group companies led the market decline, with losses in the range 8-23.5 per cent. Group flagship Adani Enterprises fell the most at 23.44 per cent, while Adani Green fell 18.95 per cent and Adani Energy Solutions was at its 20 per cent lower circuit.

Despite the gravity of the charges and the fact that the allegations were made by the US authorities, the carnage was not as much as in January 2023, when over $100 billion of the group’s market cap had been wiped out.

The indictment started a political slugfest with leader of the opposition Rahul Gandhi demanding the arrest of Adani and a JPC probe, while the ruling BJP countered by saying that the bribery allegations pertained to states ruled by either the Congress or allied parties.

Moody’s Rating said in a statement that the indictment of Adani Group’s chairman and other senior officials on bribery charges was credit negative for the group’s companies and its focus would be on the group’s ability to access capital to meet liquidity requirements.

Market watchers said that rating agencies are likely to put the ratings of Adani Group companies on “rating watch with developing implications” as they see the bribery accusation charges as a material event.

Pointers

* Gautam Adani, Sagar Adani and five others bribed Indian officials to secure lucrative energy contracts

* The bribes were payoffs so that Indian state governments could arrange power sale agreements between Solar Energy Corporation and State discoms. The power would be supplied by Adani Green Energy and its subsidiary

* Bribes were paid to government officials of Tamil Nadu, Chhattisgarh, Odisha, J&K and Andhra Pradesh

* US prosecutors said Gautam Adani personally met with Indian officials to implement the bribes

* Adani Green Energy aborted a $600-m bond sale following the indictment

* Over $26 billion of Adani group market-cap was wiped out in the stock markets

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