Possibly the most important man in Indian logistics has just been charged with an enormous fraud in the US. Gautum Adani, who owns the Adani Group of which the port company APSEZ is part, has been charged, in the words of the US Justice Department, “with conspiracies to commit securities and wire fraud and substantive securities fraud for their roles in a multi-billion-dollar scheme to obtain funds from U.S. investors and global financial institutions on the basis of false and misleading statements”.
This is not a complete surprise. Investment companies have been accusing Adani of fraud for well over a year. Notably the New York based investment analysis company, Hindenburg Research, has made a series of allegations around both the financial probity but also the viability of Adani Group. These allegations briefly destabilised Adani Group, with large falls in the value of its shares yet it seemed to recover strongly over the past year.
The allegations from American authorities seem to focus on inaccurate statements and unethical behaviour around the raising of funds on the New York Stock Exchange for investment in an energy project. The US Attorney General’s Office stated that Adani “orchestrated an elaborate scheme to bribe Indian government officials to secure contracts worth billions of dollars”.
Adani Group has a number of businesses including energy, however central to its operations is the Mundra Port complex. This has risen to become India’s largest container port, surpassing the previously largest port, the Jawaharlal Nehru Port complex near Mumbai. Adani’s construction of Mundra port has been of great importance to the growth of the Indian economy. Previous to Mundra’s construction India had insufficient deep sea port capacity and was reliant on trans-shipment services from Dubai and Singapore. Adani has now complemented the Mundra facility with a new complex at Thiruvananthapuram in southern India. Any interruption to the development of Adani Group’s port investments would have a significant impact on the growth of the Indian logistics sector.
The US authorities have applied to have Gautum Adani extradited to the US, however the Indian authorities declined to investigate allegations earlier in the year so it is unclear what the course of the US case will be. It is believed that Gautum Adani is close to the Indian Prime Minister and his party, who rely on Mr Adani to manage important projects such as port development.
Source: Ti Insight
Author: Thomas Cullen
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