Japanese Banks Continue to Support Adani Group: Report

Japan’s biggest banks plan to maintain ties with billionaire Gautam Adani despite recent bribery charges in the US; Even as other global firms, including Barclays Plc, are reassessing their exposure to the Indian conglomerate.

Mizuho Financial Group believes the latest developments regarding Adani will not have a lasting impact and plans to continue supporting the group, according to a Bloomberg report citing sources familiar with the matter. Sources in the report similarly cited Sumitomo Mitsui Financial Group Inc. and Mitsubishi UFJ Financial Group Inc. also have no plans to cut ties and remain open to providing new financing if needed in the future, he said.

The continued support from Japanese banks underscores divisions within the financial industry over Adani, following accusations that it and others were involved in a $250 million scheme to bribe Indian government officials to secure solar energy contracts. Adani’s vast conglomerate, which rose to power, denied the allegations and said they were unfounded. Representatives of the company are holding meetings with creditors and investors to clarify its position and provide assurance.

While Adani Group is unlikely to seek new financing requests in the near future, some global banks concerned about reputational risk are reducing their exposure to one of India’s largest conglomerates. However, Japan’s capital-rich lenders were reassured by their backing of cash-generating assets. Adani has strong government connections and any legal action initiated by the US is expected to take a long time, according to the report.

“Drawing on their experience in Southeast Asia in the ’90s, Japanese banks have developed sophisticated frameworks for assessing emerging market risks,” said Ben Charoenwong, assistant professor of finance at Insead in Singapore. Banks such as MUFG and SMBC, which see India as a key growth market, are unlikely to significantly reduce their overall exposure to India, but they may tighten procedures or increase risk premiums for certain deals, the report added.

Meanwhile, Barclays, a long-time lender to Adani, has suspended new loans and financing to the group, according to sources in the report. The British bank had already reduced its exposure to direct lending and bond underwriting after short-seller Hindenburg Research criticized the company last year. But Barclays continued to provide part of its $394 million trade finance facility for a solar module facility at Adani last year. Earlier this year, Barclays also acted as bookrunner for Adani Green Energy Ltd.’s $409 million bond sale.

Jefferies Financial Group, which supported Adani following Hindenburg’s fraud allegations, has not yet entered into a new agreement with the group following the additional accusations that emerged following the US indictment, according to the report. The bank has not made a formal decision on whether to pause its involvement and is waiting for a clear resolution to the accusations before considering new business with Adani.

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