TotalEnergies, the French oil and energy powerhouse, has announced that it is freezing fresh investments and payments to the Adani Group until the consequences of US bribery charges against its founder, Gautam Adani, are known.
Total declared it wasn’t informed about the corruption probe into Adani Green Energy (AGEL), in which it is a minority shareholder with a 19.75 per cent stake. Total also has a 37.4 per cent share in Adani Total Gas, a joint venture that’s rapidly expanding its gas distribution network across India.
In a statement, the French giant said it “will not make any fresh financial contribution as part of its investments in the Adani Group companies” until “such time when the accusations against the Adani Group individuals and their consequences have been clarified.” Total, which says it rejects all forms of corruption, may now have to review its expansion plans in India, which were meant to drive the group’s Asian development.
The fallout from the Total announcement was immediate. AGEL shares plunged more than 11 per cent Monday before recovering to close down nearly 9 per cent. The latest fall brought AGEL shares’ five-day losses to a staggering 34 per cent following news that Gautam Adani and his nephew, Sagar Adani, were among those indicted by the US Justice Department for alleged corrupt payments to Indian government officials and politicians.
Gautam Adani and seven other people were charged last week by US prosecutors with agreeing to pay around $265 million in bribes to Indian government officials. The charges relate to alleged payments to obtain contracts that could yield $2 billion in profits over 20 years as well as to develop India’s biggest solar power project.
The Adani Group has strongly denied the accusations, as well as those made by the US Securities and Exchange Commission in a tandem civil case, calling them “baseless.” It has vowed to seek “all possible legal recourse.”
AGEL is leading massive projects, including the Khavda Energy Park in the Kutch desert, which is slated to produce a whopping 30,000 MW (30 GW) of electricity when completed.
It also has a clutch of other solar and wind energy projects in different parts of the country. Globally, AGEL is pursuing ambitious mega-projects, including 10 GW of hydroelectric projects in Nepal, Bhutan, Kenya, Tanzania, the Philippines, and Vietnam.
However, the indictment has shaken confidence. The Kenyan government last week cancelled two major Adani projects in response to the Justice Department charges.
In Bangladesh, a panel examining power generation contracts with Adani Power and other companies called on the interim government to hire a global legal firm to ensure a transparent probe into previous deals.
Other global banks are also reportedly considering halting fresh credit to the company following the second crisis in two years to shake the Adani Group.
Adani Green is also feeling the financial squeeze. The company shelved a $600-million bond issue after the indictment. In May, the company raised $400 million from a consortium of five international banks.
Despite the mounting challenges, the Adani Group insists that its finances remain robust. It reported earnings of $10 billion before interest, tax, depreciation, and amortization (EBITDA) for the first half of its financial year. The group expects to gross $12 billion for the full year. The company said Monday it had cash balances of Rs 55,024 crore, more than enough to cover its long-term debt payments for the next 28 months.
Importantly, in the last six months, the group invested a huge Rs 75,227 crore, but its debt only increased by Rs 16,882 crore. “Each of the group companies has sufficient liquidity to cover all debt servicing requirements for at least the next 12 months,” the company said.
The biggest concern for the group right now will be whether foreign banks and financial institutions will continue backing the group as it races to reassure investors that its ambitious mega-projects won’t grind to a halt over funding issues.
Adani Total Gas supplies gas in 13 states and has been looking to expand its reach even further. The company raised $375 million (Rs 3,130 crore) in September from a consortium of international banks to fund a further expansion of its network.
GQG, the boutique investment firm and one of Adani’s big backers, doubled down on its support Monday, reiterating that it has no plans to sell its holdings. “We feel the Indian government will maintain its support for Gautam Adani as he is the most important infrastructure developer in the country,” GQG said.
“We believe the fundamentals of the companies we are invested in remain sound,” GQG said. GQG says it has invested $8.1 billion in the group. The investment firm warned, however, that the legal proceedings might drag on and potentially weigh on the group.
Most of GQG’s investments were made at a time when the share prices of the Adani Group companies had nosedived after the bombshell Hindenburg Research report in early 2023, accusing the conglomerate of “blatant” share manipulation and accounting fraud. The group has consistently denied those allegations.
In October, group flagship Adani Enterprises raised $500 million (Rs 4,200 crore) by selling shares to large institutional investors like mutual funds and banks, stating that the money would be used for funding capital expenditure, debt repayment, and other purposes.
