Indian billionaire Adani is in decline again but could not get out

Indian billionaire Gautam Adani’s feverish push to expand his global energy and infrastructure empire has been thwarted by US bribery charges, but analysts believe the tycoon will bounce back.

The bombshell indictment in New York on Wednesday accusing Adani and his associates of paying more than $250 million in bribes to secure lucrative government contracts sparked a frenzied stock sell-off.

Within hours, India’s opposition leader Rahul Gandhi demanded Adani’s arrest and Kenyan President William Ruto canceled airport and power deals worth about $2.5 billion.

Adani Group rejected the bribery charge as “baseless” but Shriram Subramanian, founder of corporate governance consultancy InGovern Research Services, said it had “huge” consequences.

“They will defend themselves through appeal or reach an agreement,” Subramanian told AFP from Bengaluru.

“This is a huge blow to their reputation and corporate governance practices,” he added.

‘It pales in comparison’

Once the world’s second richest man, Adani’s meteoric rise has been dogged by controversy and allegations that he benefited from his close ties to Hindu nationalist Prime Minister Narendra Modi.

The conglomerate has weathered earlier allegations of impropriety that wiped $150 billion off its market value in 2023 after a report by US short seller Hindenburg Research accused it of “brazen” corporate fraud.

“Given Adani’s influence, resources and reach, he has the capacity to rebound (and) we saw that last time,” Michael Kugelman, director of the Wilson Center’s South Asia Institute, told AFP. he said.

Adani’s empire spans coal, airports, cement and media and has interests in countries from Australia to Bhutan, Israel, Sri Lanka, Tanzania and Nepal.

But Kugelman warned that the challenge this time is “unprecedented.”

“The severity and scale is completely different if you are charged by the U.S. justice system,” Kugelman said.

“The Hindenburg pales in comparison to what it currently faces.”

Bribery accusations are a major hurdle for key investors and fueling grassroots demands for greater scrutiny of big projects.

In neighboring Sri Lanka, activists opposing Adani Green Energy’s $442 million wind energy project demanded the deal be postponed.

“Investors who stuck with him during Hindenburg will have a much lower risk tolerance,” Kugelman said.

‘Slow down’

Adani is India’s largest private port operator and operates major airports, including the financial capital of Mumbai and Ahmedabad, the largest city in Modi’s home state of Gujarat.

The group is also involved in major coal and renewable energy projects in the world’s fifth largest economy.

In October, Sagar Adani, Gautam’s nephew and board member named in the indictment, told AFP there was “no political connection” between the Adani Group and the Modi government.

Mumbai-based market research analyst Hemindra Hazari said the conglomerate, a relatively new player in key infrastructure sectors, is backed by large investors who would otherwise be cautious as it “is considered to be close to the distribution of power”.

“Most invested despite the group’s limited managerial bandwidth and experience…because…it appeared to obtain highly profitable terms…which would not have been possible in any normal market-based economy.” he told AFP.

Adani said a “significant portion” of its debt was sourced from foreign sources, including banks and institutional investors, and that “things will slow down for them for now.”

‘Reputation blows’

The Indian government has not yet commented.

Opposition leader Rahul Gandhi was quick to demand Adani’s arrest but told reporters he knew it wouldn’t happen and claimed “Modi was protecting him”.

Modi’s Bharatiya Janata Party (BJP) responded by saying the alleged bribery was linked to Indian states led by opposition parties.

Subramanian believes that this is just a “dent” in Adani’s reputation and that they “will continue to seek and win projects in India and the rest of the world.”

But Kugelman warned that the “reputation blows” to not only the Adani Group but also India were “severe”.

As for the future, Kugelman said it’s “unknown” how the accusations will affect new US president Donald Trump.

“I don’t think this will really impact the broader India-US relationship,” he said.

But he noted that Trump could look “positively” at a shrewd businessman like Adani or “use him for more positive policies on tariffs.”