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Divergence In Strategy, TotalEnergies Hits Pause, GQG Partners Goes All-In On Adani Group. Calculated Confidence Or Blind Faith?
French oil major TotalEnergies’ has decided to halt further investments into Adani Group following a U.S. Department of Justice indictment alleging a $265 million bribery scheme. The accusations have sent ripples through the corporate and financial world, putting Adani and his top executives under intense scrutiny.
TotalEnergies, which holds a significant 20% stake in Adani Green Energy Ltd., stressed its zero-tolerance stance on corruption, stating:
“Until such time when the accusations against the Adani group individuals and their consequences have been clarified, TotalEnergies will not make any new financial contribution as part of its investments in the Adani group of companies.”
With financial exposure estimated at $4-5 billion, this pause signals caution rather than outright exit. The move may, however, lead other international investors to reevaluate their positions amidst heightened concerns over Adani’s transparency and governance practices.
GQG Partners Holding the Line
While TotalEnergies takes a step back, GQG Partners, led by Rajiv Jain, is doubling down on its investments in the Adani Group. Despite the bribery allegations, GQG reaffirmed its commitment, citing sound fundamentals across Adani’s sprawling conglomerate.
On Monday, GQG Partners made its stance crystal clear: the bribery allegations targeting individuals associated with Adani Green Energy Ltd. won’t alter its investment strategy. With a staggering $9.7 billion already committed to Adani Group companies—accounting for 6.1% of GQG’s total assets—the firm believes its exposure is not only manageable but also well-positioned for long-term gains.
“Since initiating our positions, we have seen strong fundamental growth in these businesses, resulting in meaningful earnings growth,” GQG stated in a memo. It emphasized that the charges brought by U.S. prosecutors relate to individuals, not the company or its broader operations.
When news of the U.S. Department of Justice indictment broke, Adani Group stocks took an immediate hit, losing around ₹2.45 lakh crore in market capitalization over three tumultuous trading days. But, as the dust settled, selling pressure began to ease, supported by resilient domestic backing.
GQG, which began investing in Adani stocks during the Hindenburg controversy earlier in 2023, has spread its investments across seven Adani companies, including Adani Enterprises, Adani Ports, and Adani Green Energy. Each, it argues, operates independently with distinct revenue streams and client bases, insulating the broader conglomerate from a single point of failure.
For all the storm clouds, GQG sees a clear horizon. The firm stated that India’s domestic banks, including government-owned ones, have shown no signs of restricting credit to Adani, even as foreign capital might become harder to access.
GQG’s bet appears to be rooted in a belief that short-term turbulence won’t derail the long-term trajectory of the Adani Group’s diverse businesses. “These are independently managed businesses,” GQG noted, pointing to strong earnings growth across its Adani portfolio, which has delivered positive returns as of November 21.
The Scandal in Focus
At the center of the allegations are claims of bribes paid to secure contracts that could yield $2 billion in profits over two decades. The charges, part of a U.S. investigation that began in 2023, also accuse the group of making misleading statements to the public.
Unsurprisingly, the Adani Group has strongly denied the allegations, dismissing them as baseless. It has vowed to pursue “all possible legal recourse” to challenge both the criminal and civil cases filed by U.S. prosecutors and the Securities and Exchange Commission (SEC).
Predictably, the news rattled Adani Group stocks, with an estimated ₹2.45 lakh crore wiped out in market value within days. However, the initial sell-off subsided as domestic banks and investors showed no inclination to withdraw support. India’s government-owned banks, in particular, continue to extend credit lines to Adani’s ventures, mitigating concerns about liquidity or capital crunches.
The allegations have ignited intense scrutiny, both in India and abroad. At the heart of the controversy is a power purchase agreement between the southern Indian state of Andhra Pradesh and Adani Green Energy, a deal allegedly secured through improper means. While the Adani Group has categorically denied the allegations as baseless, the repercussions are starting to unfold.
Andhra Pradesh Digs Deeper
According to a U.S. indictment, a significant portion of the alleged bribes—$228 million—was paid to a government official to persuade Andhra Pradesh’s state electricity distribution companies to purchase nearly seven gigawatts of solar power. This figure represents the largest solar power procurement by any Indian state.
The state’s finance minister, Payyavula Keshav, revealed that Andhra Pradesh is conducting a comprehensive review of files from the previous administration, under which the agreement was signed. “We will also examine what can be done next, like, is there a possibility to cancel the contract? The state government is looking into this issue closely,” Keshav said on Monday.
Meanwhile, the YSR Congress Party, which led the state during the time in question, has denied any wrongdoing.
Market Ripples
Shares of Adani Green Energy experienced a steep plunge of over 11% on Monday before recovering slightly to close 7.9% lower. Similarly, Adani Total Gas, in which French energy giant TotalEnergies holds a 37.4% stake, saw its shares dip 1.4%.
The market reaction followed TotalEnergies’ announcement that it would pause future investments in Adani Group firms until the bribery allegations are resolved.
Cancel Contracts
The fallout isn’t confined to India. Adani’s global projects and partnerships are also under the microscope:
Sri Lanka: A U.S. development agency is reassessing its $550 million loan commitment for a port development project linked to the Adani Group. No funds have been disbursed yet.
Kenya: President William Ruto recently canceled a procurement process expected to hand control of Kenya’s main airport to Adani.
Bangladesh: An interim government panel reviewing power generation contracts, including one with Adani Power, has called for hiring an international legal firm to ensure a thorough investigation.
Political Storm in India
Meanwhile, the scandal has intensified political tensions in India, with opposition parties seizing the moment to target both the Adani Group and its perceived ties to Prime Minister Narendra Modi.
Mallikarjun Kharge, president of the Congress Party, urged the government to hold a parliamentary discussion on the Adani controversy, stating that it “has the potential of tarnishing India’s image on the global stage.” Opposition leaders have long alleged that Modi’s government favors Adani’s businesses, a claim both the government and Adani deny.
Calculated Confidence or Blind Faith?
As the scandal unfolds, the contrast between GQG’s confidence, Total Energies decision and the market’s nervousness raises questions about the true resilience of the Adani Group. While GQG doubles down, other investors might take a more cautious approach, waiting to see how the legal battles play out.
For now, one thing remains certain – GQG is standing firm in its belief that the Adani Group is far more than the sum of its controversies. Only time will tell whether this calculated gamble pays off or if it serves as a lesson in the unpredictable world of high-risk investing.
The Adani Group’s immediate challenge is clear – weather the legal storm while maintaining investor confidence. If the allegations prove substantive, it could impact the group’s ability to secure foreign capital. However, domestic support, both from banks and investors, remains robust, offering a lifeline.
As for TotalEnergies and GQG, their divergent strategies show a fundamental truth of global investing—where some see insurmountable risk, others see opportunity. Only time will tell which perspective proves prescient.
Yet, one thing that can be said – nothing seems to keep Adani down for long.