Adani Group lost Rs. 3,000,000,000,000 (3 lakhs Cr) Market cap today.
Here is a simple explanation of what happened, based on available facts!
The New York Federal Court charges Gautam Adani and 7 others in a $250 million bribery case!
But,if the fraud is committed in India then why is a US court passing the judgement?
Because Adani and his associates levereged these deal to raise capital from USA investors.
The estimated profit from these projects is $2 billion+, according to reports.
Asia’s 2nd richest man, his nephew Sagar Adani and Vneet Jaain, MD & CEO at Adani Green have been found guilty of securities & wire transfer fraud!
But, what is the case of USD $2 Billion?
Here’s a simple breakdown of a complex story:
1. An ‘Indian Energy Company’ and a ‘US Issuer’, which was a renewable energy company from Mauritius, won awards to supply large amounts of solar power to the Solar Energy Corporation of India (SECI).
2. SECI’s role was to sell this power to various state electricity companies.
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(Solar Energy Corporation of India Ltd. (SECI) is a company of the Ministry of New and Renewable Energy, Government of India, established to facilitate the implementation of the National Solar Mission (NSM).)
3. However, SECI faced difficulties finding buyers, leading to challenges in establishing power purchase agreements with companies like Adani Group and Azure Power.
4. Faced with this issue, some individuals allegedly devised a plan to bribe Indian state government officials to ensure that SECI’s power was purchased.
5. According to US prosecutors, between 2020 and 2024, more than $250 million in bribes were planned to secure these power contracts with the Indian government.
The expected profit was said to be over $2 billion over approximately 20 years.
6. It is also reported that Gautam Adani met with an Indian government official to discuss this alleged bribery plan.
Since the case is out of the way, what exactly is an ‘indictment’ in the US?
An indictment in the US is basically a formal written accusation originating with a prosecutor and issued by a grand jury against a party charged with a crime.
When a person is indicted, they are given formal notice that they are believed to have committed a crime.
They can then hire an defence lawyer and take steps to defend themselves.
Source
https://kerseylawoffice.com/what-does-indictment-mean/
What did Adani Group respond in media?
The Adani group released a statement later today denying these allegations.
Meanwhile, panicked investors rushed for the exit door.
What is the larger impact on Adani group?
These are some pretty serious allegations and could potentially cut them off from the US markets altogether, say experts.
Adani Green had to cancel its $600 million bond issue. This can significantly hamper the Adani Group’s ability to raise capital and expand, which is a big NEGATIVE!
How about GQG partners who bought Adani shares close to 20% stake in Adani Group of companies?
Even GQG Partners, who made a killing “buying the dip” last year, said that they are reviewing their holdings. Not a good sign!
Globally, there may be a situation and political pressure where the deals might get cancelled.
For example, Kenya cancelled proposed deals with Adani Group for energy ministry.
