Being associated with a renewable energy venture is often seen as a relatively benign and purposeful move for the wealthy. Especially in a world that is becoming increasingly conscious of its carbon footprint and the need to lower emissions. However, for one of India’s richest men, his green foray has turned out to be anything but.
That man happens to be none other than Gautam Adani, whose net worth is estimated to be in the region of $58 billion by Forbes. His global ports to commodities conglomerate – Adani Group – is a dominant force in India and has a presence in several global markets.
For nearly a decade, Adani has displayed an interest in renewable energy. He has often spoken of his ambition to become the world’s largest producer of green energy with ideas of investing up to $70 billion in renewables projects.
It came as no surprise when his flagship Adani Group provided the seed capital to get Adani Green Energy Limited, or “AGEL” as its commonly known, off the ground in 2016. But instead of bringing benign vibes and green credentials, it’s put the Indian billionaire bang in the middle of an international furor, U.S. fraud charges and a scandal that refuses to go away since a short-seller’s allegations last year.
What Just Happened?
Late on Wednesday, Gautam Adani and seven of his business associates were charged with fraud in New York, including allegations of them having orchestrated a $250 million “bribery scheme” to secure “solar contracts” for AGEL and concealing it to raise money in U.S. markets.
Filing the charges, U.S. attorney for the Eastern District of New York Breon Peace noted: “As alleged, the defendants orchestrated an elaborate scheme to bribe Indian government officials to secure contracts worth billions of dollars and lied about the bribery scheme as they sought to raise capital from U.S. and international investors.”
Peace and his team added that the offenses 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 U.S. investors.”
In response, Adani Group described the charges as “baseless” and promised a legal rebuttal, while India’s government deferred comment on the development back to the group.
But legal action stateside is not where it all started to go wrong for Gautam Adani. That dates back to January 2023, when short-seller Hindenberg Research published a report alleging decades of “brazen” stock manipulation and accounting fraud.
It resulted in share price slumps and outlook downgrades by ratings agencies for many of Adani Group’s firms. A recovery followed after Adani himself assured the Indian market that his companies – 10 of which are publicly listed – had an exemplary record of fulfilling their national and international debt obligations and solid balance sheets.
Nevertheless, a probe by India’s market regulator Securities and Exchange Board of India followed. However, without reaching a definitive conclusion to its investigation, the Indian regulator instead accused Hindenburg Research, in June this year, of violating U.S. securities laws by colluding with an investor who made a short bet (i.e. a punt that share prices will fall) against the Adani Group ahead of the report’s release.
Hindenburg dismissed the allegation and came up with another piece of investigative research in August alleging that SEBI’s Chief Madhabi Puri Buch had links with offshore funds used by Adani Group. Both Buch and Adani Group denied wrongdoing, while SEBI said its investigation had been thorough. Another share price slump ensued followed by another partial recovery later.
However, the U.S. fraud charges would be harder to shake-off compared to a public spat with a short-seller. On Thursday, the flagship Adani Enterprises share price fell nearly 23% according to Reuters; several multiples of the decline level noted the day after Hindenburg Research’s report on the group was published last year.
Adani Group companies’ combined market capitalization also fell below $150 billion at the close of the day’s trading in India. The figure was above $230 billion before its troubles began.
There will also likely be wider repercussions following the development. For instance, Kenya’s government cancelled a near-$2 billion airport project with Adani Group after the U.S. fraud charges surfaced.
But What Of AGEL?
The U.S. charges hit AGEL – the Adani firm in the eye of the storm – the hardest. Nearly a fifth (19%) of its value was wiped out on Thursday. The company also said it would no longer proceed with a $600 million bond offering.
The firm’s future direction of travel is as unclear as Adani or his seven co-defendants appearing in a New York court any time soon. None are in custody, and will likely attempt to get the charges dismissed without appearing first.
For now, nothing changes for AGEL, which enjoys a minority stake in it by French giant TotalEnergies. It has a current renewable energy project portfolio capacity of 5.29GW, of which approximately 2.4GW is operational. It includes the 648MW Kamuthi Solar Power Project which is the world’s 12th-largest by capacity.
However, the full extent of the reputational damage following the U.S. fraud charges is hard to fathom at the moment. Back in 2019, AGEL won accolades as India’s first company to offer investment grade dollar green bonds in the region of $362.5 million with 20-year maturity date. Postponement of its latest bond offering is indicative of darker days ahead, both for the company and the embattled billionaire behind it.