Adani clearly lied about not being investigated

MYSTERY POST: The secret sauce was bribes

Adani and GQG buddying around

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We pretty much know the story at this point. Adani Green is a renewable energy company. It wanted to sell its energy to the Indian public. The way it could do this was by competing with other companies and winning government contracts. Adani Green wanted to win the contracts but could not offer the lowest price. Instead of spending on discounting its energy, it decided to spend on bribing some government officials.

America is a rich country with rich investors, and infrastructure companies need capital. So one of the ways Adani Green got money was by borrowing it from American investors. In one of the hundreds of documents Adani’s lawyers prepared so that it could borrow money was a line saying something along the lines of “we’re an ethical company and don’t bribe people or governments”. Turns out though they do actually bribe people and governments. The US loves playing global police so somehow that gives them the right to go after Adani for criminal fraud?

I have my inkling but I don’t know whether or not Adani actually bribed anyone. The US Department of Justice and the Securities and Exchange Commission are suing Adani and over time we’ll know more. Of course, all of this will take time and the result will depend on just how much evidence the US DOJ and SEC actually have with them. (Here’s the US DOJ indictment and here’s the SEC press release.)

But there is at least one obvious securities law violation that we can be confident about. Indian securities law! In March 2024, Bloomberg reported that US prosecutors were investigating Adani Group for potential bribery. An investigation such as this would, ideally, be reported to the stock exchanges because it would affect the stock price. Any investor buying the stock had the right to know what they were buying.

Adani Group hadn’t reported it, but no matter. Another thing though that Adani Group had to do was to issue a clarification to the Bloomberg report itself.¹ Here’s Adani’s clarification:

Adani Enterprises Limited (“Company”) states that it has not received any notice from the Department of Justice of U.S. in respect of the allegation referred to in the said article.

The Company states that the report is false.

Usually companies try to hide behind fuzzy ambiguous words so that plausible deniability can save them if need be. This is not that! “The report is false” is as clear as it gets. We know now that US prosecutors were indeed investigating Adani, and Adani did obviously lie about it in their disclosure. It cannot be more open-and-shut than this. The only thing for SEBI to do here is to decide the quantum of the punishment it wants to give out, based on whatever the law allows for.

How does SEBI even decide the quantum in this case? One important measure for SEBI would be to see just how material was the piece of information that Adani lied about. On 19 November 2024, the stock price of Adani Green closed at ₹1,412. After the US DOJ went public with its indictment, it fell to ₹898 in about five days. That’s 36% less as a direct result of the US DOJ’s announcement. 36% is extremely material.

GQG likes the stock

When Hindenburg Research released its short report accusing Adani of fraud back in 2023, there was one seemingly credible investor who saw the massive fall in the Adani companies’ stock prices as an opportunity—GQG Partners. Here’s their reaction to the news of the US DOJ investigation.