Japan’s biggest banks plan to maintain ties with billionaire Gautam Adani That’s despite US bribery allegations, while other global companies including Barclays Plc are reevaluating their exposure to the Indian conglomerate.
mizuho Financial Group Inc. expects the latest saga surrounding Adani According to people familiar with the matter, it will not have a long-term impact and the group intends to continue supporting it. Sumitomo Mitsui Financial Group Inc. and Mitsubishi UFJ Financial Group Inc. also have no plans to step back and would be open to new financing if needed later, people familiar with the matter said.
Tokyo-based spokespeople for the three lenders declined to comment. An Adani Group representative did not immediately comment.
The Japanese support underlines the division among finance companies over Adani, after he and others were accused of masterminding a $250 million scheme to bribe Indian government officials to win solar power contracts . Adani’s giant port-to-power group has denied the allegations and described the allegations as baseless. Its representatives are meeting lenders and investors to reassure them and explain its stand on the matter.
While it is currently unlikely that new financing requests will be made by the group, some global banks concerned about reputational risk are curbing their exposure to one of India’s largest conglomerates. Capital-rich Japanese lenders are satisfied that they are backing cash-producing assets. Adani has strong government ties and any legal process brought by the US would take a long time, according to people familiar.
“Drawing inspiration from their experiences in Southeast Asia in the 90s, Japanese banks have developed sophisticated frameworks for evaluating emerging market risks,” said Ben Charoenwong, associate finance professor at INSEAD in Singapore, about lenders’ risk tolerance. said in. Asian financial crisis. “Banks like MUFG and SMBC, which view India as an important growth market, are unlikely to substantially reduce their investments in India overall” although they may tighten processes or reduce exposure to some deals. Can increase premium.
Meanwhile, Barclays, which has long been Adani’s preferred bank, has suspended providing new loans or financing to the group for the time being, according to people familiar with the matter.
The British lender had been gradually reducing its exposure to direct loans and bond underwriting after short seller Hindenburg Research took aim at the company last year. bloomberg The news was reported earlier. Still, it provided a part of a $394 million trade-finance facility to an Adani unit last year for a solar module plant. Earlier this year, Barclays was one of the bookrunners of a $409 million bond sale by Adani Green Energy Ltd.
A Barclays spokesperson declined to comment on Adani’s contacts or the status of his relationship with the group.
Jefferies Financial Group Inc., which stood by Adani after Hindenburg accused the group of fraud, did not discuss a new deal with the group after further allegations emerged following the U.S. indictment, according to people familiar with the matter. Is. The bank has not made any formal decisions about whether to block or pause deals, and is awaiting a concrete outcome of the allegations before engaging in new business, the people said.
Jefferies temporarily held some Adani shares on its balance sheet as a market maker, but not as an investment in the company, the people said. He said the Adani Group represents less than 4 percent of Jefferies’ India business.
The Indian arm of Jefferies last year brokered the sale of shares worth $1.9 billion in four Adani group companies to Florida-based investment firm GQG Partners. Most recently, Jefferies was the lead manager of Adani Enterprises Ltd. and other companies, which raised $500 million in a stock sale last month.
A representative for the New York-based firm declined to comment.
Meanwhile, at least two other major U.S. banks that in recent months were aiming to grab a small portion of debt funds from Adani Group have now halted those efforts, according to people familiar.
Japan’s biggest lenders, which recently raised their annual profit forecasts to new records, have figured prominently in some of this year’s biggest foreign bond deals by Indian companies, including Adani Group, data compiled by Bloomberg show. . Most recently, he was among those arranging a planned $600 million bond sale by Adani Green, which was canceled after the allegations became public.
People familiar said Mizuho is not too concerned about the current investigation and has no intention of withdrawing from the group, which has not denied making any payments. Mizuho has helped finance Adani units that run ports and airports, which are steady cash generators.
Sumitomo and Mitsubishi UFJ are confident of the companies’ ability to repay debt and do not expect much impact on business, the people said.
Like their Japanese counterparts, some Middle East banks such as Emirates NBD Bank PJSC are equally puzzled by their ties to Adani, the people said. They have no plans to walk away from existing commitments and will lend new money for future projects based on their regular due diligence processes, the people said, adding that their capital was committed to good assets in the Adani portfolio. Emirates NBD declined to comment.
“Japanese and Middle Eastern banks, with access to relatively low-cost capital, are actively exploring global growth and diversification opportunities,” said Ashutosh Mishra, head of research, institutional desk at Ashika Stock Broking Ltd. Asset-heavy Indian groups like Adani, which offer a strong growth outlook.
stock fell
Adani’s dollar bonds and stock fell immediately after the indictment, indicating investors were worried about increased risk. In the past week, S&P Global Ratings, Moody’s Ratings and Fitch Ratings All have reduced their credit outlook on some Adani companies to negative from stable. S&P cited funding access and financing-cost concerns. Fitch also said it may downgrade its rating on Adani Ports and Special Economic Zone Ltd’s dollar bonds to junk.
Companies in other sectors are also reevaluating their relationships with Adani. TotalEnergies SE said it would not make any new investments in the group until the consequences of the US indictments became clear. Kenya meanwhile canceled two Adani contracts worth about $2.6 billion in the wake of the allegations.
Adani Enterprises shares fell 23 percent on November 21 following the US move, but have since recovered some of those losses. The stock surged this week after the company said Gautam Adani and his associates have not been charged under the US Foreign Corrupt Practices Act.