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A US court indictment against the Adani Group and its chairman, Gautam Adani, for bribing Indian government officials has sent shockwaves through financial markets. By 10:45 am on November 21, the group’s combined market value had dropped by ₹2.6 lakh crore ($30 billion). Experts warn this could mark the beginning of a series of challenges for the conglomerate.
Allegations of Bribery and Corruption
The US Securities and Exchange Commission (SEC) has accused Gautam and Sagar Adani of bribing Indian officials with hundreds of millions of dollars. These payments reportedly secured purchase contracts for Adani Green Energy and Azure Power.
Impact on Indian Lenders
Indian banks that have lent heavily to the Adani Group are also facing losses. The State Bank of India (SBI), the country’s largest lender, has lost over ₹30,000 crore in market capitalization due to its exposure to Adani’s companies.
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Gautam Adani’s Net Worth Takes a Hit
Before the market sell-off, Gautam Adani was worth $60.9 billion, according to Forbes data as of November 20. The indictment has raised concerns about potential heavy fines and reputational damage for the Adani Group, which could further impact its stock prices. Senior advocate HP Ranina noted that Indian companies may bear the brunt of significant fines if Adani decides to settle the case in the US.
Legal and Political Ramifications
Experts predict legal and political challenges for the group. Sanjay Asher, a senior partner at Crawford Bayley & Co., believes the issue isn’t “earth-shattering” and expects Adani to settle the matter. However, he warns that vested interests in India may initiate fresh legal challenges.
On the political front, opposition parties are already using the controversy to attack Adani’s perceived closeness to the ruling government. Rahul Gandhi, a prominent leader of the Indian National Congress, has announced a press conference to criticize both Adani and Prime Minister Narendra Modi’s administration.
Shareholder Activism and Investor Reaction
Shareholders may also take action. Shriram Subramanian, founder of shareholder advisory firm Ingovern, suggested that investors could demand the removal of individuals implicated in the corruption allegations. GQG Partners, a major investor in Adani Group, has already lost nearly a fifth of its value on the Australian stock exchange.
Mixed Views on Market Impact
While some experts believe the controversy will have lasting repercussions, others are more optimistic. Venugopal Garre, MD at Bernstein, expects markets to move past the issue within a week. He emphasized that such incidents, though serious, often fail to create long-term disruptions.
The Road Ahead
The Adani Group faces a challenging period ahead, marked by legal battles, political criticism, and potential financial penalties. The fallout could also lead to closer scrutiny of corporate governance and management practices within the group.
As the situation unfolds, the financial and political landscapes in India may witness significant changes, driven by the actions of stakeholders across sectors.