The Takeaway
The U.S. indictment of Indian business tycoon Gautam Adani on conspiracies to commit securities and wire fraud and substantive securities fraud could have far-reaching implications for India’s corporate governance and regulatory oversight, as well as for its clean energy ambitions, with some international investors re-evaluating their exposure to the country’s markets. One major Canadian pension fund is also under scrutiny over the alleged involvement of three of its former executives in Adani-linked projects. As the legal developments unfold, India’s regulatory response and the ability to restore investor confidence will be pivotal in determining the future stability of its markets.
In Brief
- On November 21, a five-count criminal indictment was unsealed in the Eastern District of New York, accusing Indian billionaire Gautam Adani and seven others, including his nephew, of allegedly “[perpetrating]” a US$250-million bribery scheme linked to Indian solar energy projects. Adani and two others were formally accused of falsifying financial documents to U.S. investors.
- The U.S. indictment points specifically to Adani Green Energy Ltd. (AGEL), one of India’s largest renewables companies, and implicates former executives from Canada’s Caisse de dépôt et placement du Québec (CDPQ) for their alleged involvement in facilitating the bribery scheme. Those employees were terminated in 2023 and CDPQ is co-operating with authorities.
- Adani Group has rejected the allegations, calling them baseless, and has pledged to pursue “all legal recourse.” A week after the indictment was unsealed, AGEL clarified that — contrary to some news reports — Adani, his nephew Sagar Adani, and managing director Vneet S. Jaain, were not charged with bribery under the U.S. Foreign Corrupt Practices Act (FCPA).
- AGEL further denied any FCPA violations, stating the individuals were only named under the broader fraud charges, not the more serious bribery or obstruction charges.
- Adani’s empire, which spans energy, ports, and infrastructure, had recently rebounded after facing losses of over US$60 billion in 2023 following allegations by Hindenburg Research, a short-selling firm, which accused Adani of stock manipulation and fraud. Adani replied to the accusations in a 413-page rebuttal, labelling the allegations a “malicious combination of selective misinformation.” The conglomerate stated that it had “always been in compliance with all laws.”
- The Adani case raises questions about the integrity of India’s corporate governance standards and could impact foreign investments in India’s green energy sector.
Implications
The indictment sent shockwaves across international markets. Following news of the indictment, Kenyan President William Ruto cancelled a US$1.85-billion airport modernization deal and a US$736-million energy contract with Adani, citing “credible information of corruption,” and said Kenya would seek alternative partners. Bangladesh is reportedly revisiting the terms of its deal with Adani Power amid rising domestic criticism of overpriced electricity imports, while Sri Lanka is reconsidering its Adani-backed wind power projects in the towns of Mannar and Pooneryn.
The fallout has also spread to global investors, with French energy and petroleum company TotalEnergies freezing new financial contributions to Adani projects until the U.S. allegations are resolved. As a key partner in India’s renewable energy ambitions, TotalEnergies’ move could signal that international stakeholders are growing more uneasy about India’s corporate governance standards. With international investors reassessing their exposure, Indian Prime Minister Narendra Modi’s government will face mounting pressure to rebuild trust and address perceptions of “crony capitalism” threatening India’s global economic aspirations.
India’s clean energy ambitions have likely taken a hit. The fraud charges against Adani threaten to disrupt India’s clean energy trajectory. The Adani Group has been crucial to India’s goal of sourcing 50 per cent of its energy from renewables by 2030. Now, however, the company’s reputational challenges could undermine its role in driving solar and wind projects and could hamper efforts to reduce India’s reliance on Chinese solar imports. The fallout has already triggered a US$600-million bond cancellation by the Adani Group and initially wiped US$55 billion off its market value, raising doubts about the financing of key projects critical to India’s green transition.
A large Canadian pension fund has come under scrutiny. Quebec’s largest pension fund, CDPQ, which holds a roughly 53 per cent stake in Adani’s Azure Power, may also face reputational risks following the indictment of three former executives for their alleged involvement in the bribery scheme. U.S. prosecutors have charged the individuals with conspiracy to violate the Foreign Corrupt Practices Act, alleging they facilitated over US$250 million in bribes to secure government contracts in India. CDPQ terminated the three employees named in the indictment in 2023 for undisclosed reasons and is fully co-operating with authorities.
Another Canadian pension fund, the Ontario Municipal Employees Retirement System, Azure Power's second-largest shareholder, holds a 21 per cent stake through its infrastructure arm, following a US$219-million investment in 2021. In light of the Adani Group’s ongoing legal turmoil, other Canadian pension funds active in India could feel pressure to reassess their investments.
What's Next
- Legal developments and investor reactions
If convicted, Adani could face substantial legal repercussions, including fines, sanctions, and restricted access to U.S. capital markets, potentially hampering his ability to secure funding. While the fallout is expected to remain limited to the Adani Group, experts warn that the scandal could slow the company’s expansion and growth, making it harder to raise capital for future projects.
There are already signs that investor sentiment has been shaken. Major investors in Adani Group companies have seen their own share prices plummet. GQG Partners, a global investment firm listed on the Australian Securities Exchange and headquartered in the U.S., invested US$10 billion in Adani companies and has reported a 21 per cent drop in its own shares. Some environmental, social, and governance (ESG) funds, previously attracted to AGEL’s renewable energy portfolio, are also re-evaluating their holdings.
- Greater scrutiny of India’s regulatory environment
Calls for stronger action from the Securities and Exchange Board of India (SEBI) are growing, especially in sectors like renewable energy, where corporate governance is critical. SEBI's slow response to both the Hindenburg allegations, and the more recent fraud and bribery charges, has raised doubts about its effectiveness. This scrutiny may drive broader regulatory reforms, particularly in sectors dominated by large conglomerates. With increased global attention on corporate misconduct, India faces pressure to increase transparency and enforce stricter standards.
• Edited by Erin Williams, Senior Program Manager, Vina Nadjibulla, Vice-President Research & Strategy, Ted Fraser, Senior Editor, APF Canada
