Following reports that the US prosecutors are investigating whether the Adani Group gave bribes to Indian officials to get energy projects cleared, global brokerage firm JP Morgan said it is not changing its view on the Indian conglomerate and that the scope for corruption in the group’s renewable energy project is “highly unlikely”.
“Given the high level of transparency involved in various renewable energy tenders floated in India, the scope for significant corruption and bribery looks highly unlikely to us,” said Love Sharma of JP Morgan.
The brokerage said as the details of the report are very scant and the investigation itself might not lead to any successful prosecution, with likely limited potential financial/fundamental impact, it won’t make changes to recommendations at this stage for the Adani Group.
“Within the Adani Group, we continue to favour Adani Ports, where we are overweight across the curve. We highlight that as late as Nov-2023, Adani Ports had received about US$553m as a loan for its Colombo Port project from the US government’s development financial arm, DFC. While this may not imply a “clean chit”, it does indicate some level of diligence being undertaken at the Adani Ports level ahead of making the investment,” Sharma said.
Over the weekend, Bloomberg reported that US prosecutors from the US Attorney Office and Justice Department (DoJ) are looking at an Adani Group entity and Azure Power Global around potential bribery investigations.
Based on the profile of USD bond issuers from the group, this could be related to Adani Green Energy, JP Morgan wrote in a report, adding there is one 12GW manufacturing-linked solar energy project that was signed by both Adani Green (8GW allocation) and Azure Power (4GW) with SECI (Solar Energy Corporation of India) in January 2020.
“This project remains under construction and does not form part of any of the Restricted Group bonds from these two entities,” the report said.
“In terms of provisions of the US Foreign Corrupt Practices Act (FCPA), anti-bribery provisions can lead to a fine of US$2m or twice the monetary gain, whereas for individuals it could be up to 5 years’ imprisonment and a $250,000 fine or twice the monetary gain,” JP Morgan said, adding that 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.
The Adani Group has denied investigations and said it hasn’t received any notice from the US Department of Justice on the allegations. The report has had a negative impact on the stock prices of various Adani entities. Shares of Adani Green were trading 3% lower today.
