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Lash. Wednesday, Gautamdani, one of the richest people in the world, was in good spirits.
That was the day that the Adani Group Diday six hundred million dollar bond placement, a successful bond is shoe. That evening, as the Bloomberg story points out, it seemed like a normal evening for him. Gotamadani played a card game with his wife.
He went to sleep, but around three am, a colleague delivered some shocking news.
He was woken up in the middle of the night to be told that the US has accused him of being involved in a bribery, conspiracy of securities fraud, and wire fraud, all of which carry both jail time and significantly high monetary penalties if found guilty. And yes, but probably was a great day for Gotama in hours turned into a nightmare.
Menikadoshi is a Bloomberg senior editor based in Mumbai. She says within minutes, senior executives of the Adanni Group gathered on conference calls. They spent hours deciding whether they should release a statement and what to say.
There was no immediate reaction from the Adanni group to the news. And it's only much later that they did issue a denial of all the allegations and the promise they would defend themselves vigorously.
In the meantime, the group's stocks and bonds plunged, wiping nearly thirty billion dollars off the conglomerates' market value. The Adanni Group's businesses touched many parts of daily life in India. Almost half of the country's shipping containers passed through Adanni owned ports, and tens of millions of people passed through its airports each year. The group also has political influence. Its businesses have offer'ill been closely aligned with Prime Minister
Narndra Modi's priorities and Galta. Madani has been a key partner to Modi in his efforts to build the country's domestic infrastructure.
He has or his businesses have a leading position in several infrastructure sectors such as sports, airports, logistics, power, and he's also the second largest cement manufacturer in the country. All of this puts him at the center of India's infrastructure store.
Welcome to the Big Take Asia from Bloomberg News. I'm Wanha. Every week we take you inside some of the world's biggest and most powerful economies and the markets, tycoons, and businesses that drive this ever shifting region. Today, on the show, Adani indicted what do the US charges mean for the Adani Group and does a case cast doubt on India's economy and foreign investments. The indictment, all fifty four pages of it, details allegations against Galta Madani and other senior
executives at Adani Green Energy. In it, federal prosecutors accused them of being involved in a complex bribery scheme. We asked Menikadoshi, a Bloomberg senior editor based in Mumbai, to unpack the case.
The allegations are that Gautamadani and other co defendants sought to bribe several state government officials in India to purchase expensive power from the projects that Adani companies and one other renewable energy company were developing in India.
The indictment alleges that the bribery scheme took place in India between twenty twenty and twenty twenty four, and that Adani and other defendants promised to pay more than two hundred and fifty million dollars in bribes to Indian government officials to win solar energy contracts. Now, Adani Group doesn't trade in the US, but it does have American investors, and federal prosecutors alleged that they concealed the plan to bribe officials as they try to raise money from US investors.
And the reason why US prosecutors are allowed to pursue these allegations is because of something called the Foreign Corrupt Practices Act or the FCPA.
Under the FCPA and other US laws, if any company or entity raises funds in the US but doesn't comply with all the terms and conditions that come with being able to raise funds, especially indulges in corrupt activities, then they can be prosecuted in such fashion.
And one thing Menica says that stands out about this case is the kind of evidence the US authorities claim they have and federal prosecutors claim they found a digital trail of the alleged bribery scheme, and according to the FEDS.
They found PowerPoint presentations and records of the bribes that the Adanis purportedly wanted to pay Indian state gouvernment officials for the off take of power. This in itself is quite surprising, many lawyers have told me, because really, who does corruption in that organized fashion and would keep evidence of it on their everyday communication devices.
The Adani group has denied the US allegations and has said it would seek legal recourse, but what happens next is expected to have political as well as business ramifications. Galta Madani is a close ally of India's Prime Minister Novendramodi and has been a key partner for him, and prosecuting this case could take months or even years, which means the case may be impacted by the appointment of
a new US attorney in New York. When President elect Donald Trump returns to the White House early next year, he'll choose someone new to leave the office prosecuting the case.
That will be one of the most interesting situations to watch. The speed at which these charges were unsealed has surprised many. Most it expected that the indictment would take several more months, So there does seem to be an element of politics in this entire situation. Now the question is, with a new administration taking over in the US, will it continue to prosecute the case in this fashion or will it
seek to drop the charges? Lawyers are mixed on what could potentially happen, but that will depend on how the new President of the United States, Donald Trump views his relationship with India, views his relationship with Prime Minister Mody and seeks to use whatever leverage he wants to be able to get India to play the role he expects.
They've both been great friends, but that might mean nothing for a case of this nature, because in the negotiation of two large countries, almost all of these are tools that each country will seek to gain leveraged through. Unfortunately, for Adani that means he becomes a pawn in the process.
The Trump transition team didn't respond to requests for comment from Bloomberg, and India's government declined to comment. When contacted for further information, the White House said.
The specifics of this this is something that SEC and DJ can speak to directly. But again, we believe that we are this has been that this relationship between India and the US has been built on a strong foundation.
After the break, how the spotlight on Galta Madani and his sprawling conglomate changed when short Sellar Hindenburg Research called the Donnis Rise the largest Khan in corporate history. And we'll look at what the case against the Adani Group could mean for the broader indiannakon. Before these leaders charges from US prosecutors galto Madani's rongling empire had been rocked by claims that it had manipulated its stock price and committed accounting fraud.
So, just to give the high level understanding of who Hindenburg Research is, because it is best known for.
In a short selling attack. In January twenty twenty three, a New York based group called Hindenburg Research accused the Adani Group of what they said was the largest Khan in corporate history.
It did disclose a short position in a Dhani Group, and what it's saying, Paul, basically is that the conglomerate engaged in market manipulation and then accounting fraud as well. Now, Gotamdani has denied this and he says that the report is baseless, but that hasn't of course, been enough to prevent a sell off in the market as well.
So this time, the duel effect that the Hindenburg Research report and short seller attack had on Adani was that it decimated his fortunes. At what point in time the group had lost over one hundred and fifty billion dollars in market value.
That's Bloomberg's Menikadoshi again.
But it also hurt his image significantly because it brought back into the forefront several questions about corporate governance and market manipulation that otherwise had been buried because of his so called political proximity to Narate Remodi and other politicians.
The Hiddenburg report sent the Donni Group's shares into steep decline. It took several months for the stocks of the various subsidiary companies under a Danni Group to bounce back, but Menka says even to this day, the conglomerate itself is still in recovery mode.
After the Hindenburg attack, they did what any smart business group would do, which was to cut back on debt, raise more funds, and to make sure that they would never be in as vulnerable a position as they were in January twenty twenty three.
Earlier this year, Bloomberg sat down with the Adannies for an exclusive interview in which Galtemadanni, the group's founder and the family patriarch, addressed the Hindenburg report. He says the incident brought the family together and made them more united.
This incident makes family bring more together and work very hard to fight it back. And in fact, basically these Hindenburg issues of this last year was a Adani group history is a high years performance.
But the Hindenburg report prompted the Justice Department as well as the SEC to look into some of the claims it contained, and in March Bloomberg reported that US prosecutors had widened their probe to look at whether the company may have engaged in bribery as well as the conduct of Galtum Adonna himself. That probe resulted in these latest charges against Galtam Madani and other defendants, his nephew, Sagar Adani and Vanit Jane. Both Sagar and Vanit are executives
at Adanni Green Energy. I asked Menica how the latest indictment compares to the Hindenburg allegations.
Haindenburg and this are chalk and cheese. Haindenberg was an aggregation of several allegations that the Adani Group had faced over the years, with a few new ones thrown in that effectively raised questions that had already been raised in India in the past, which were of poor governance standards,
market manipulation, and fraudulent auditing in that sense. The Hindenburg research report, while scandalous because of the way it put those questions together, did not necessarily ask of anything very new of the Adani Group. This is a whole different level of seriousness. These are two of the US's most premier investigating agencies accusing Gothamadani of promising to pay bribes in India and then lying about that corruption to investors across the world, including in the US.
Following the US indictment, Bloomberg reported that Indian regulators are also looking into whether Adani Group violated market rules for failing to properly disclose the US investigation, and Menica says the US charges could just be the beginning of the group's legal troubles.
Besides what government agencies and regulators will do, these cases do provide grounds for investors in various different jurisdictions that have invested in various different Dhani companies to stand up and ask the question, did you make adequate disclosures? So yes, The expectation is that they could be a series of lawsuits that the Adani Group might have to face.
So Menica. Given how serious the charges are, What does this case mean for companies in India? Is this like an indictment on corporate India.
It definitely doesn't make Corporate India look good, but it's not an indictment of Corporate India. Given the significance of the infrastructure sector in India's growth story, and given how core the Adani Group is to the role out of infrastructure in the country, this episode will be significant to
the fortunes of both the economy and the sector. What this does do is hurt India at a time when the country is seeking to take its story to a wider set of global investors, as it makes efforts to go from the fifth largest economy in the world to the third largest economy, and as it also makes efforts to become a developed nation over the next twenty years. At a time when you are quoting foreign investors, episodes
like this don't help your narrative at all. Will this mean investors will run away from India?
No?
Will this mean that some investors will say there is an additional risk premiere for doing business in India? Probably yes. Will this mean that some investors will now want to stay away from infrastructure sectors that have significant government intervention. Absolutely so it will have a graded impact on both the business sector in India as well as the economy. Nothing will happen in absolute You won't see a sudden
flood of money out. You won't see people give up on India because most investors want to go where growth is. But you will see a moderation in their enthusiasm towards the country, at least for a while as they digest the seriousness of this situation.
This is the Big Take Asia from Bloomberg News. I'm wan ha. If you're interested in hearing more about Indian billionaire Galta Madani and his brawling empire, check out our previous episode on the rise of the Donni Group called two hundred Billion Dollars, four Airs and One Mighty Empire. It's linked in our show notes and you can find it on the Big Take Asia feed. This episode was produced by Young Young Naomi Mum and Jessica Beck with help from Roehead Potok. It was mixed by Alex Suguiera
and fact checked by David Fox and Adriana Tapia. It was edited by Caitlin Kenny, Jeanette Rodriguez and Buma Shrivastov. There was additional reporting by Kai Schultz, Buma and Anto Antony. Naomi Shaven is our senior producer, Elizabeth Ponso is our senior editor, Nicole Beemster Broer is our executive producer, and Sage Bauman is Boomberg's head podcasts. Please follow and review The Big Take Asia wherever you listen to podcasts. It really helps new listeners find the show. See you next time.