Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Lash. Wednesday, Gautamdani, one of the richest people in the world,
Speaker 2: was in good spirits.
Speaker 3: That was the day that the Adani Group Diday six
Speaker 3: hundred million dollar bond placement, a successful bond is shoe.
Speaker 3: That evening, as the Bloomberg story points out, it seemed
Speaker 3: like a normal evening for him. Gotamadani played a card
Speaker 3: game with his wife.
Speaker 2: He went to sleep, but around three am, a colleague
Speaker 2: delivered some shocking news.
Speaker 3: He was woken up in the middle of the night
Speaker 3: to be told that the US has accused him of
Speaker 3: being involved in a bribery, conspiracy of securities fraud, and
Speaker 3: wire fraud, all of which carry both jail time and
Speaker 3: significantly high monetary penalties if found guilty. And yes, but
Speaker 3: probably was a great day for Gotama in hours turned
Speaker 3: into a nightmare.
Speaker 2: Menikadoshi is a Bloomberg senior editor based in Mumbai. She
Speaker 2: says within minutes, senior executives of the Adanni Group gathered
Speaker 2: on conference calls. They spent hours deciding whether they should
Speaker 2: release a statement and what to say.
Speaker 3: There was no immediate reaction from the Adanni group to
Speaker 3: the news. And it's only much later that they did
Speaker 3: issue a denial of all the allegations and the promise
Speaker 3: they would defend themselves vigorously.
Speaker 2: In the meantime, the group's stocks and bonds plunged, wiping
Speaker 2: nearly thirty billion dollars off the conglomerates' market value. The
Speaker 2: Adanni Group's businesses touched many parts of daily life in India.
Speaker 2: Almost half of the country's shipping containers passed through Adanni
Speaker 2: owned ports, and tens of millions of people passed through
Speaker 2: its airports each year. The group also has political influence.
Speaker 2: Its businesses have offer'ill been closely aligned with Prime Minister
Speaker 2: Narndra Modi's priorities and Galta. Madani has been a key
Speaker 2: partner to Modi in his efforts to build the country's
Speaker 2: domestic infrastructure.
Speaker 3: He has or his businesses have a leading position in
Speaker 3: several infrastructure sectors such as sports, airports, logistics, power, and
Speaker 3: he's also the second largest cement manufacturer in the country.
Speaker 3: All of this puts him at the center of India's
Speaker 3: infrastructure store.
Speaker 2: Welcome to the Big Take Asia from Bloomberg News. I'm Wanha.
Speaker 2: Every week we take you inside some of the world's
Speaker 2: biggest and most powerful economies and the markets, tycoons, and
Speaker 2: businesses that drive this ever shifting region. Today, on the show,
Speaker 2: Adani indicted what do the US charges mean for the
Speaker 2: Adani Group and does a case cast doubt on India's
Speaker 2: economy and foreign investments. The indictment, all fifty four pages
Speaker 2: of it, details allegations against Galta Madani and other senior
Speaker 2: executives at Adani Green Energy. In it, federal prosecutors accused
Speaker 2: them of being involved in a complex bribery scheme. We
Speaker 2: asked Menikadoshi, a Bloomberg senior editor based in Mumbai, to
Speaker 2: unpack the case.
Speaker 3: The allegations are that Gautamadani and other co defendants sought
Speaker 3: to bribe several state government officials in India to purchase
Speaker 3: expensive power from the projects that Adani companies and one
Speaker 3: other renewable energy company were developing in India.
Speaker 2: The indictment alleges that the bribery scheme took place in
Speaker 2: India between twenty twenty and twenty twenty four, and that
Speaker 2: Adani and other defendants promised to pay more than two
Speaker 2: hundred and fifty million dollars in bribes to Indian government
Speaker 2: officials to win solar energy contracts. Now, Adani Group doesn't
Speaker 2: trade in the US, but it does have American investors,
Speaker 2: and federal prosecutors alleged that they concealed the plan to
Speaker 2: bribe officials as they try to raise money from US investors.
Speaker 2: And the reason why US prosecutors are allowed to pursue
Speaker 2: these allegations is because of something called the Foreign Corrupt
Speaker 2: Practices Act or the FCPA.
Speaker 3: Under the FCPA and other US laws, if any company
Speaker 3: or entity raises funds in the US but doesn't comply
Speaker 3: with all the terms and conditions that come with being
Speaker 3: able to raise funds, especially indulges in corrupt activities, then
Speaker 3: they can be prosecuted in such fashion.
Speaker 2: And one thing Menica says that stands out about this
Speaker 2: case is the kind of evidence the US authorities claim
Speaker 2: they have and federal prosecutors claim they found a digital
Speaker 2: trail of the alleged bribery scheme, and according to the FEDS.
Speaker 3: They found PowerPoint presentations and records of the bribes that
Speaker 3: the Adanis purportedly wanted to pay Indian state gouvernment officials
Speaker 3: for the off take of power. This in itself is
Speaker 3: quite surprising, many lawyers have told me, because really, who
Speaker 3: does corruption in that organized fashion and would keep evidence
Speaker 3: of it on their everyday communication devices.
Speaker 2: The Adani group has denied the US allegations and has
Speaker 2: said it would seek legal recourse, but what happens next
Speaker 2: is expected to have political as well as business ramifications.
Speaker 2: Galta Madani is a close ally of India's Prime Minister
Speaker 2: Novendramodi and has been a key partner for him, and
Speaker 2: prosecuting this case could take months or even years, which
Speaker 2: means the case may be impacted by the appointment of
Speaker 2: a new US attorney in New York. When President elect
Speaker 2: Donald Trump returns to the White House early next year,
Speaker 2: he'll choose someone new to leave the office prosecuting the case.
Speaker 3: That will be one of the most interesting situations to watch.
Speaker 3: The speed at which these charges were unsealed has surprised many.
Speaker 3: Most it expected that the indictment would take several more months,
Speaker 3: So there does seem to be an element of politics
Speaker 3: in this entire situation. Now the question is, with a
Speaker 3: new administration taking over in the US, will it continue
Speaker 3: to prosecute the case in this fashion or will it
Speaker 3: seek to drop the charges? Lawyers are mixed on what
Speaker 3: could potentially happen, but that will depend on how the
Speaker 3: new President of the United States, Donald Trump views his
Speaker 3: relationship with India, views his relationship with Prime Minister Mody
Speaker 3: and seeks to use whatever leverage he wants to be
Speaker 3: able to get India to play the role he expects.
Speaker 3: They've both been great friends, but that might mean nothing
Speaker 3: for a case of this nature, because in the negotiation
Speaker 3: of two large countries, almost all of these are tools
Speaker 3: that each country will seek to gain leveraged through. Unfortunately,
Speaker 3: for Adani that means he becomes a pawn in the process.
Speaker 2: The Trump transition team didn't respond to requests for comment
Speaker 2: from Bloomberg, and India's government declined to comment. When contacted
Speaker 2: for further information, the White House said.
Speaker 1: The specifics of this this is something that SEC and
Speaker 1: DJ can speak to directly. But again, we believe that
Speaker 1: we are this has been that this relationship between India
Speaker 1: and the US has been built on a strong foundation.
Speaker 2: After the break, how the spotlight on Galta Madani and
Speaker 2: his sprawling conglomate changed when short Sellar Hindenburg Research called
Speaker 2: the Donnis Rise the largest Khan in corporate history. And
Speaker 2: we'll look at what the case against the Adani Group
Speaker 2: could mean for the broader indiannakon. Before these leaders charges
Speaker 2: from US prosecutors galto Madani's rongling empire had been rocked
Speaker 2: by claims that it had manipulated its stock price and
Speaker 2: committed accounting fraud.
Speaker 4: So, just to give the high level understanding of who
Speaker 4: Hindenburg Research is, because it is best known for.
Speaker 2: In a short selling attack. In January twenty twenty three,
Speaker 2: a New York based group called Hindenburg Research accused the
Speaker 2: Adani Group of what they said was the largest Khan
Speaker 2: in corporate history.
Speaker 4: It did disclose a short position in a Dhani Group,
Speaker 4: and what it's saying, Paul, basically is that the conglomerate
Speaker 4: engaged in market manipulation and then accounting fraud as well. Now,
Speaker 4: Gotamdani has denied this and he says that the report
Speaker 4: is baseless, but that hasn't of course, been enough to
Speaker 4: prevent a sell off in the market as well.
Speaker 3: So this time, the duel effect that the Hindenburg Research
Speaker 3: report and short seller attack had on Adani was that
Speaker 3: it decimated his fortunes. At what point in time the
Speaker 3: group had lost over one hundred and fifty billion dollars
Speaker 3: in market value.
Speaker 2: That's Bloomberg's Menikadoshi again.
Speaker 3: But it also hurt his image significantly because it brought
Speaker 3: back into the forefront several questions about corporate governance and
Speaker 3: market manipulation that otherwise had been buried because of his
Speaker 3: so called political proximity to Narate Remodi and other politicians.
Speaker 2: The Hiddenburg report sent the Donni Group's shares into steep decline.
Speaker 2: It took several months for the stocks of the various
Speaker 2: subsidiary companies under a Danni Group to bounce back, but
Speaker 2: Menka says even to this day, the conglomerate itself is
Speaker 2: still in recovery mode.
Speaker 3: After the Hindenburg attack, they did what any smart business
Speaker 3: group would do, which was to cut back on debt,
Speaker 3: raise more funds, and to make sure that they would
Speaker 3: never be in as vulnerable a position as they were
Speaker 3: in January twenty twenty three.
Speaker 2: Earlier this year, Bloomberg sat down with the Adannies for
Speaker 2: an exclusive interview in which Galtemadanni, the group's founder and
Speaker 2: the family patriarch, addressed the Hindenburg report. He says the
Speaker 2: incident brought the family together and made them more united.
Speaker 5: This incident makes family bring more together and work very
Speaker 5: hard to fight it back. And in fact, basically these
Speaker 5: Hindenburg issues of this last year was a Adani group
Speaker 5: history is a high years performance.
Speaker 2: But the Hindenburg report prompted the Justice Department as well
Speaker 2: as the SEC to look into some of the claims
Speaker 2: it contained, and in March Bloomberg reported that US prosecutors
Speaker 2: had widened their probe to look at whether the company
Speaker 2: may have engaged in bribery as well as the conduct
Speaker 2: of Galtum Adonna himself. That probe resulted in these latest
Speaker 2: charges against Galtam Madani and other defendants, his nephew, Sagar
Speaker 2: Adani and Vanit Jane. Both Sagar and Vanit are executives
Speaker 2: at Adanni Green Energy. I asked Menica how the latest
Speaker 2: indictment compares to the Hindenburg allegations.
Speaker 3: Haindenburg and this are chalk and cheese. Haindenberg was an
Speaker 3: aggregation of several allegations that the Adani Group had faced
Speaker 3: over the years, with a few new ones thrown in
Speaker 3: that effectively raised questions that had already been raised in
Speaker 3: India in the past, which were of poor governance standards,
Speaker 3: market manipulation, and fraudulent auditing in that sense. The Hindenburg
Speaker 3: research report, while scandalous because of the way it put
Speaker 3: those questions together, did not necessarily ask of anything very
Speaker 3: new of the Adani Group. This is a whole different
Speaker 3: level of seriousness. These are two of the US's most
Speaker 3: premier investigating agencies accusing Gothamadani of promising to pay bribes
Speaker 3: in India and then lying about that corruption to investors
Speaker 3: across the world, including in the US.
Speaker 2: Following the US indictment, Bloomberg reported that Indian regulators are
Speaker 2: also looking into whether Adani Group violated market rules for
Speaker 2: failing to properly disclose the US investigation, and Menica says
Speaker 2: the US charges could just be the beginning of the
Speaker 2: group's legal troubles.
Speaker 3: Besides what government agencies and regulators will do, these cases
Speaker 3: do provide grounds for investors in various different jurisdictions that
Speaker 3: have invested in various different Dhani companies to stand up
Speaker 3: and ask the question, did you make adequate disclosures? So yes,
Speaker 3: The expectation is that they could be a series of
Speaker 3: lawsuits that the Adani Group might have to face.
Speaker 2: So Menica. Given how serious the charges are, What does
Speaker 2: this case mean for companies in India? Is this like
Speaker 2: an indictment on corporate India.
Speaker 3: It definitely doesn't make Corporate India look good, but it's
Speaker 3: not an indictment of Corporate India. Given the significance of
Speaker 3: the infrastructure sector in India's growth story, and given how
Speaker 3: core the Adani Group is to the role out of
Speaker 3: infrastructure in the country, this episode will be significant to
Speaker 3: the fortunes of both the economy and the sector. What
Speaker 3: this does do is hurt India at a time when
Speaker 3: the country is seeking to take its story to a
Speaker 3: wider set of global investors, as it makes efforts to
Speaker 3: go from the fifth largest economy in the world to
Speaker 3: the third largest economy, and as it also makes efforts
Speaker 3: to become a developed nation over the next twenty years.
Speaker 3: At a time when you are quoting foreign investors, episodes
Speaker 3: like this don't help your narrative at all. Will this
Speaker 3: mean investors will run away from India?
Speaker 1: No?
Speaker 3: Will this mean that some investors will say there is
Speaker 3: an additional risk premiere for doing business in India? Probably yes.
Speaker 3: Will this mean that some investors will now want to
Speaker 3: stay away from infrastructure sectors that have significant government intervention.
Speaker 3: Absolutely so it will have a graded impact on both
Speaker 3: the business sector in India as well as the economy.
Speaker 3: Nothing will happen in absolute You won't see a sudden
Speaker 3: flood of money out. You won't see people give up
Speaker 3: on India because most investors want to go where growth is.
Speaker 3: But you will see a moderation in their enthusiasm towards
Speaker 3: the country, at least for a while as they digest
Speaker 3: the seriousness of this situation.
Speaker 2: This is the Big Take Asia from Bloomberg News. I'm
Speaker 2: wan ha. If you're interested in hearing more about Indian
Speaker 2: billionaire Galta Madani and his brawling empire, check out our
Speaker 2: previous episode on the rise of the Donni Group called
Speaker 2: two hundred Billion Dollars, four Airs and One Mighty Empire.
Speaker 2: It's linked in our show notes and you can find
Speaker 2: it on the Big Take Asia feed. This episode was
Speaker 2: produced by Young Young Naomi Mum and Jessica Beck with
Speaker 2: help from Roehead Potok. It was mixed by Alex Suguiera
Speaker 2: and fact checked by David Fox and Adriana Tapia. It
Speaker 2: was edited by Caitlin Kenny, Jeanette Rodriguez and Buma Shrivastov.
Speaker 2: There was additional reporting by Kai Schultz, Buma and Anto Antony.
Speaker 2: Naomi Shaven is our senior producer, Elizabeth Ponso is our
Speaker 2: senior editor, Nicole Beemster Broer is our executive producer, and
Speaker 2: Sage Bauman is Boomberg's head podcasts. Please follow and review
Speaker 2: The Big Take Asia wherever you listen to podcasts. It
Speaker 2: really helps new listeners find the show. See you next time.