In a proverbial “when it rains, it pours” moment, the Adani Group is having a rather disastrous close to the year. French oil major TotalEnergies won’t make any more investments in the Adani Group, saying it was not informed of the US bribery charges against Gautam Adani. Kenya has canceled a procurement process worth more than $2 billion that was expected to give the Adani Group control of its main airport. Kenya’s energy ministry has also scrapped a massive multi-year, multimillion-dollar public-private partnership it signed with Adani Energy earlier this year. Sri Lanka is reassessing both a wind and a port project.

Bangladesh has set up a committee to investigate power generation contracts signed during the tenure of former prime minister Sheikh Hasina, one of them with Adani Power. Back home, Andhra Pradesh is likely to suspend a power purchase deal linked to the group and to add to future fund-raising doom, Moody’s, S&P, and Fitch, the rating agencies have either lowered their outlook for bonds of Adani group companies or put them on watch. All this in a short but intense burst of activity following bribery charges and indictment of board members of Adani Green Energy Ltd., including its group chairman Gautam Adani, by the US Securities and Exchange Commission (SEC) and the Department of Justice.

It’s all a bit déjà vu. In January last year, short-seller Hindenburg Research (which describes itself as a specialist in forensic financial research) announced a short position in the Adani Group based on what it alleges was “brazen” stock manipulation, accounting fraud, and the “largest con in corporate history” by the Adani group. The accusations were met with steadfast denial from the group, peppered with a healthy dose of nationalist sentiment. Statements from the group were delivered with the Indian flag placed in the background, and social media platforms were awash with posts berating Hindenburg Research, smarting at the gall of this firm to have raised a questioning finger at one of India Inc’s crown jewels. But there was visible damage to recover from. Adani Group stocks saw sharp cuts over the next few trading sessions. So much so that Adani Enterprises withdrew its 2.5 billion dollar follow-on public offering citing “the unprecedented situation and the current market volatility”.

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This time, it may take more than a flag and a tweet. From its unassuming days of running a commodity business in the 1980s to boasting of a $100 billion market cap in 2020, the Adani Group has indeed come a long way. It was shortly after Prime Minister Modi’s historic 2014 win that Adani Green Energy was established to focus on solar, wind, and hybrid (solar wind) renewable power generation.

Situated on the Rann of Kutch in Gujarat—a vast expanse of salt marsh punctuated by deep cracks in the earth—is the company’s most ambitious project, the Khavda Renewable Energy Park project. Sprawled over 19,000 hectares, the project’s ambition is to produce at least 10 per cent of India’s stated goal of generating 500 gigawatts of non-fossil fuel electricity-generating capacity by 2030. Much like the fissures that run through this parched soil, cracks are now beginning to emerge in Adani Green’s future prospects. Amongst the renewable energy projects that US authorities believe were part of an alleged bribery scheme is Adani Green’s centrepiece, the energy park in Khavda.

Six hundred kilometres away in India’s financial capital, Mumbai, the Adani Green stock is having an even worse time. In the days following news of the US indictment, the stock’s gains evaporated like water from the salt pans of Kutch, leaving deep losses for investors, traders, and everyone in between. And while a few trading sessions have seen what in stock parlance is called a “dead cat bounce,” the last six months have seen the Adani Green stock price almost halve—a far cry from the lofty levels it surged to in 2022 of almost 3,000 rupees a share.

Challenges ahead

While the group has been swatting every piece of bad news as fast as it can, developments of the last week present several different challenges. The first is clearly reputational risk. As one of two in an increasingly duopolistic corporate landscape, the Adani group will have to recover from a very public loss of face for its promoter and its prospects. This is even more complex given the global dimension of the blow-up.

The conglomerate has business interests spreading from Australia to Indonesia and Israel to Sri Lanka. If the Indian government chooses to back the Gujarat-based group, it will have to contend with some tricky conversations with other governments. Judging by the past, the government may choose to go with public silence and private damage control. It is interesting in itself that these allegations were made public in the relatively short window between a change of guard for the US presidency—a tacit admission perhaps by the current Biden government that the charges could be handled quite differently between the incoming Trump administration and the Modi government.

Most importantly, there is a clear financial risk that the group now faces. Half of the group’s 2.38 trillion rupee long-term debt has been borrowed from overseas. A combination of lower-cost bank loans and bonds has been the easiest and most efficient instrument for the group to tap into. While there are no immediate capital needs for other parts of the conglomerate, events of the last ten days will have raised serious red flags for the global financial community.

An ally in SEBI

Luckily for the Adani group, there’s one institutional ally that has stood by them through rain or shine—India’s securities regulator. From what is known so far, SEBI is mulling conducting an inquiry into the SEC’s allegations against the Adani Group. While the legal argument is that the matter is not in SEBI’s jurisdiction, there are some glaring questions here. Did the Adani group wilfully withhold information about US investigations into Adani Green and make false statements to Indian stock exchanges?

Second, given the grave allegations from the Securities and Exchange Commission of the United States, what update does the public have regarding investigations into the previous round of allegations by Hindenburg research? There is still no conclusive report that’s been submitted to the apex court on SEBI’s findings. SEBI’s last communication to the Supreme Court was that it had completed 22 of the 24 investigations, there’s been nothing since.

What the market regulator did was quickly slap show-cause notices against Hindenburg, accusing the firm of misleading readers and causing “panic” in Adani group stocks. What should the wilful concealment of information from stock exchanges by the Adani group be called? Third, what moral authority can SEBI claim any more around an investigation into the Adani group when its chairperson, Madhabi Puri Buch, stands in a deeply compromised position? News reports suggest she neither flagged potential conflicts of interest nor recused herself from investigations into alleged stock manipulation by the Adani Group.

And finally, but crucially, SEBI’s mandate is to protect the interests of Indian investors in the securities market, to prohibit fraudulent and unfair trade practices, and to ensure market integrity. And when circumstances demand it, to conduct a thorough examination of allegations such as the ones that have been made. That’s not a vocation; it is SEBI’s job. Why has the country’s regulator, that enjoys quasi- executive, quasi-judicial and quasi-legislative powers gone into a full-fledged slump?

The regulator isn’t alone in this “shroud of silence.” It has for a company the Ministry of New and Renewable Energy, the Power Ministry, the Solar Energy Corporation of India, and the Supreme Court, to name a few. But it is alone in the severe damage that’s been caused to shareholder value, to levels of accountability that are—and should be associated with listed companies, and to perpetuating and validating the idea that rules in India are not one size fits all.

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If the regulator is at all committed to its institutional role, it must do a few things immediately. It must submit its findings around the allegations made by Hindenburg and share them with the public. SEBI’s head, Ms Buch, must step aside from all investigations into the group and agree to appear before a Joint Parliamentary Committee to answer questions around the alleged association she and her husband have had with the Adani group. Finally, the regulator must reach out to the SEC in the US for more information around the allegations made in its release and assess the potential damage it can continue to wreak on shareholder value.

To be clear, this is neither unprecedented nor unusual. There are enough instances from the recent past where serious allegations of financial fraud have emerged around corporates—some small and some, as it was in the case with Satyam, very large. SEBI’s role is not to wring its hands and promise to “look into it.” As the caretaker and custodian of India’s financial markets and the wealth of scores of investors, it is time to take charge and accountability; something its American counterpart the SEC has done.

Earlier this year, the Adani group organised a visit for journalists to the Khavda Renewable Energy Park project in the Rann of Kutch. News reports that followed the visit described what the project promised to be: five times the size of Paris, visible from space, the world’s biggest energy plant. Boasting on the size and scale of Adani Green’s pet project, Sagar Adani, who leads the Khavda project and is named in the criminal indictment on alleged securities fraud conspiracy, said in an interview, “I don’t even do the math anymore.” Neither, it seems, does the country’s regulator.

Mitali Mukherjee is Director of the Journalist Programmes at the Reuters Institute for the Study of Journalism, University of Oxford. She is a political economy journalist with more than two decades of experience in TV, print and digital journalism. Mitali has co-founded two start-ups that focussed on civil society and financial literacy and her key areas of interest are gender and climate change.