The indictment of Gautam Adani and seven others by the United States Department of Justice and the Securities and Exchange Commission (SEC) for alleged bribery and fraud is likely to trip the group’s ambitious fundraising plans.
Experts said more bond offerings could be postponed, as corporate governance and reputational risks may keep investors away for now. In addition, the group’s cost of borrowing is expected to go up by 200-300 basis points.
While the energy-to-infrastructure conglomerate called off its $600-million bond issue for Adani Green Energy, sources in the know said that this was part of a broader plan of raising $3.5 billion announced in May.
Also ReadAdani Group scraps $600 million bond deal after alleged bribery and fraud charges
The group was looking to raise the amount using Adani Enterprises ($2 billion) and Adani Energy Solutions ($1.5 billion). There is no clarity on the timelines of future bond issuances, bond dealers that FE spoke to said, as the controversy rages.
Ratings agency Moody’s on Thursday said the indictment of Adani and other senior officials was “credit negative” for the group. “Our main focus when assessing the Adani Group is on the ability of its companies to access capital to meet their liquidity requirements and its governance practices,” Moody’s said.
However, JPMorgan has kept its faith in the group. Overall, assuming this is related to the renewable energy project of the companies, “we believe such provisions are highly unlikely to lead to a material financial impact even if the reported investigation moves to the prosecution stage and thereupon establishment of an instance of bribery,” it said.
It added that given the high level of transparency involved in renewable energy tenders floated in India, the scope for any significant corruption and bribery looks highly unlikely.
Shriram Subramanian, managing director of proxy advisory firm InGovern, sees a rise of at least 200 to 300 basis points in the cost of borrowing for the group due to the current crisis.
“There are clearly wider ramifications of the US indictment on the Adani group. Firstly, it has announced a slew of projects for which funding would be required from multiple agencies, including banks and investors. Certainly, project financing will become difficult after allegations of fraud and bribery by a US district court.
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