US Indictment Of Gautam Adani: Public Sector Bank Shares Tumble; Market Reaction Explained

Shares of public sector banks and financial institutions plunged by as much as 4.5 percent on Thursday, November 21, 2024, following mounting concerns over their significant exposure to the Adani Group. The market response was fueled by the recent US indictment of Gautam Adani, the chairman of the Adani Group, along with his nephew, Sagar Adani, and six others who were accused of involvement in a massive bribery scandal.

The bribe allegations are linked to over Rs 2,000 crore (approximately US $265 million) allegedly paid to Indian government officials in exchange for securing lucrative solar energy contracts with state-run electricity distribution companies. This new development has cast a shadow on the financial stability of both the Adani Group and the banks that have significant exposure to the conglomerate.

Public Sector Bank Stocks Plunge

The selling pressure on bank stocks was intense on Thursday morning, with public sector lenders bearing the brunt of the market’s reaction. Among the hardest-hit stocks were:

• State Bank of India (SBI): Down by 3.65 per cent
• Punjab National Bank (PNB): Fell 4.34 per cent
• Bank of Baroda: Dropped 4.24 per cent
• Canara Bank: Declined 3.99 per cent
• Union Bank of India: Fell by 2.25 per cent

Other public sector entities like IREDA, Power Finance Corporation (PFC), and Rural Electrification Corporation (REC) also saw notable declines, with IREDA falling 2.37 percent, PFC dropping 4.46 percent, and REC slumping 4.47 percent in early morning trade.

The significant fall in public sector bank stocks came as concerns over the Adani Group’s debt exposure and the potential ramifications on these lenders’ financial health grew more pronounced. Adani Group’s total debt exposure is estimated at approximately Rs 2.41 lakh crore, a massive liability that has sparked further investor unease.

Adani Group Stocks Plunge Further

The Adani Group stocks were among the worst performers on Thursday, with massive declines across its companies:

• Adani Green Energy: Down 17.51 per cent
• Adani Energy Solutions: Fell 20 per cent
• Adani Enterprises: Dropped 21.07 per cent
• Adani Power: Declined 12.13 per cent
• Adani Total Gas: Fell 13.75 per cent
• Adani Ports: Slumped 19.17 per cent

These significant losses in Adani stocks further dampened investor sentiment, causing a steep drop in the benchmark indices.

Market Indices Bear the Brunt of Adani Group’s Troubles

The selling pressure in the Adani stocks and the public sector banks caused a sharp decline in the broader market. By 11:30 AM IST, the Sensex had dropped by 518 points, reaching 77,060.29, while the Nifty 50 fell by 182 points to 23,335.80. The sharp decline in market indices reflects widespread investor panic triggered by the mounting legal and financial issues surrounding the Adani Group.

US Indictment and Impact on Adani Group

The US indictment has sent shockwaves through global markets, as the US prosecutors in New York have charged Gautam Adani and his associates with allegedly offering over $250 million in bribes to Indian officials to secure lucrative contracts. The indictment, which alleges that these schemes were used to raise billions of dollars by lying to investors and banks, has raised serious concerns about the financial integrity of the Adani Group.

In a statement issued by the US Attorney’s Office, Lisa H. Miller, the US Deputy Assistant Attorney General, described the charges as part of a massive bribery and fraud scheme aimed at obstructing justice and deceiving investors.

SEC Charges: A Parallel Development

In addition to the criminal charges in the US, the Securities and Exchange Commission (SEC) filed a separate complaint, charging Gautam Adani, Sagar Adani, and executives from Adani Green Energy Ltd. with conduct related to the bribery schemes. The SEC’s charges add to the mounting legal and financial challenges faced by the Adani Group. This has further raised concerns among global investors, particularly those with stakes in companies associated with the conglomerate.

Adani Group Cancels $600 Million Bond Offering

In a sign of growing financial pressure, the Adani Group cancelled its planned $600 million bond offering on Thursday, citing the legal challenges stemming from the US indictment. The move underscores the turmoil within the group, with Adani Group companies’ dollar bond prices also experiencing a sharp fall during Asian market trading hours on Thursday morning.