Japan’s largest banks intend to maintain their relationships with billionaire Gautam Adani despite bribery allegations in the United States, even as other global firms, including Barclays Plc, reconsider their exposure to the Indian conglomerate.
Mizuho Financial Group Inc. believes the controversy surrounding Adani will not have a lasting impact and plans to continue supporting the group, according to reports.
Sumitomo Mitsui Financial Group Inc. and Mitsubishi UFJ Financial Group Inc. also have no plans to withdraw and remain open to providing additional financing if required.
The backing from Japanese lenders highlights the divide among financial institutions over Adani, following charges against him and others for allegedly orchestrating a $250 million scheme to bribe Indian government officials to secure solar energy contracts.
Adani’s vast ports-to-power conglomerate has rejected the accusations, describing them as unfounded. Its representatives have been engaging with lenders and investors to clarify their position and offer reassurance.
Although the group is unlikely to request new financing in the near term, some global banks, wary of reputational risks, are reducing their exposure to one of India’s largest conglomerates. In contrast, capital-rich Japanese lenders find reassurance in the fact that they are supporting cash-generating assets.
According to people familiar with the matter, Adani’s strong ties with the government and the lengthy legal processes in the US provide additional confidence.
“Drawing from their experiences in Southeast Asia in the ‘90s, Japanese banks have developed sophisticated frameworks for evaluating emerging-market risks,” said Ben Charoenwong, an assistant finance professor at INSEAD in Singapore, commenting on the lenders’ risk tolerance post-Asian Financial Crisis.
“Banks like MUFG and SMBC, which view India as a crucial growth market, are unlikely to substantially reduce their overall India exposure,” he added, though they may tighten processes or increase risk premiums for specific deals.
According to media reports, Barclays, traditionally a key lender for Adani, has paused the issuance of new loans or financing to the group for the time being.
The British bank had been gradually reducing its exposure to direct lending and bond underwriting since Hindenburg Research, a short-seller, targeted the company last year. However, it contributed to a $394 million trade-finance facility last year for an Adani subsidiary’s solar module plant.
Earlier this year, Barclays also acted as one of the bookrunners for a $409 million bond issuance by Adani Green Energy Ltd.
Barclays has declined to comment on the bank’s exposure to Adani or the current status of its relationship with the Group.
Jefferies Financial Group Inc., which supported Adani following Hindenburg’s fraud allegations, has not engaged in discussions about new dealings with the conglomerate after additional accusations emerged with the US indictment, sources said.
The bank has yet to make a formal decision on whether to pause or cease transactions and is awaiting a definitive outcome from the charges before pursuing new business.
Jefferies temporarily held some Adani shares on its balance sheet as a market maker, rather than as a direct investment in the company, the sources added. The Adani Group accounts for less than 4% of Jefferies’s business in India.
Last year, Jefferies’s India division facilitated a $1.9 billion share sale in four Adani Group companies to GQG Partners, a Florida-based investment firm. More recently, Jefferies acted as a lead manager when Adani Enterprises Ltd., along with other companies, raised $500 million through stock sales last month. A representative for the firm declined to comment.
Meanwhile, at least two other major US banks that had been seeking a small share of debt funding from the Adani Group in recent months have now paused those efforts.
Japan’s largest lenders, which recently raised their annual profit forecasts to record highs, have played a prominent role in some of the largest overseas bond deals this year by Indian companies, including Adani Group, according to data. Most recently, they were among the arrangers of a planned $600 million bond issuance by Adani Green, which was cancelled after the charges became public.
Mizuho is not overly concerned about the ongoing investigation and has no plans to withdraw from the Group, which has not defaulted on any payments, the sources said. Mizuho has provided financing for Adani units operating ports and airports, which are reliable cash generators.
Sumitomo and Mitsubishi UFJ remain confident in the companies’ ability to service their debts and do not anticipate significant impacts on their operations, the sources added.
Similar to their Japanese counterparts, some Middle Eastern banks, such as Emirates NBD Bank PJSC, are also unconcerned about their relationship with Adani, the sources noted. They have no plans to retreat from existing commitments and are willing to provide new funding for future projects, supported by their routine due diligence processes. The sources further stated that their capital is allocated to strong assets within Adani’s 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 at the institutional desk of Ashika Stock Broking Ltd. “This creates a synergistic fit with asset-heavy Indian conglomerates like Adani, which offer a robust growth outlook.”
Shares of Adani Enterprises fell 23% on November 21 after the US indictment but have since recovered some of those losses. The stock rallied this week after the company stated that Gautam Adani and his associates had not been charged under the US Foreign Corrupt Practices Act.
Spokespersons for all three Tokyo-based lenders declined to comment, while a representative for Adani Group did not provide an immediate response.
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