Adani charges to weigh further on global funds' exit from stocks

Within the corruption allegations by US prosecutors against Gautam Adani are the reactions of his conglomerate to a Bloomberg news item from earlier this year detailing an investigation into bribes by the Justice Department.

The indictment calls the group's denials of the news report on a probe false, including that the company lied to the Indian stock exchanges BSE and NSE on March 19, 2024. As far as SEBI rules are concerned, this amounts to deceiving Indian investors.

The indictment cites a March 15 Bloomberg news report. In the report, Bloomberg said that US authorities were investigating allegations of possible collusion between an Adani firm, its wealthy chairman, and Indian officials about a potential energy project.

However, in response, the Adani Group denied being aware of any such investigation against the chairman. According to the prosecution, the rejection was allegedly to advance the fraud plan. The indictment cited that a grand jury had sent a subpoena and search warrant to Sagar Adani, Gautam Adani's nephew, a year before.

Further denials made by Adani Group's business managers and lawyers to investors, Indian stock exchanges and lenders over several weeks are included in the indictment. One such email response to Bloomberg referred to the story as "baseless," "malicious," and "defamatory."

US prosecutors in the indictment said, "These false statements concealed both the United States government's investigation and the bribery scheme from investors and financial institutions." The indictment added, "All to ensure the conglomerate's and the Indian energy company's continued access to capital in the United States and elsewhere."

In response to the indictment and media reports on the charges, Adani Group denied the allegations and called them baseless in a mandatory stock exchange filing. The statement also said, "There are no allegations made against the company."

Adani Group spokesperson said, "The allegations made by the US Department of Justice and the US. Securities and Exchange Commission against directors of Adani Green are baseless and denied."

The spokesperson citing the US DOJ said, "The charges in the indictment are allegations, and the defendants are presumed innocent unless and until proven guilty." the statement added, "all possible legal recourse will be sought."

After Adani Group's shares lost nearly 27 billion dollars in market value on Thursday, the conglomerate's stocks continued their slump on Friday. While benchmark indices opened in the green on Friday, the Sensex and nifty 50 are down over 10 per cent from their recent highs. The blue-chip nifty 50 index hit a five-month low on Thursday, nearing a technical correction territory.

Analysts say the charges on Gautam Adani will likely accelerate the sell-off in Indian stocks by foreign investors. India has already seen global investors pull out 14 billion dollars from the domestic market since September, including a record outflow last month.

Nitin Chanduka, a strategist at Bloomberg Intelligence, said, "The US charges on Adani Group could further spark risk-off sentiment.” He added, “India's market is already grappling with the sharpest earnings downgrades since the pandemic, with rich valuations resulting in a strong foreign exodus."