Japanese Banks Stand Firm on Adani Ties Amidst US Bribery Allegations

As the US indictments alleging a $250 million bribery scheme against Indian billionaire Gautam Adani and his conglomerate continue to unfold, Japan’s largest banks have opted to maintain their financial relationship with the Adani Group. This decision comes even as global players like Barclays and Jefferies reassess or curb their exposure, underscoring a sharp divide in the international finance community.

Japanese Lenders Offer Unwavering Support

Mizuho Financial Group Inc., Sumitomo Mitsui Financial Group Inc. (SMFG), and Mitsubishi UFJ Financial Group Inc. (MUFG) have expressed no intention to pull back from Adani. According to sources familiar with the matter, these banks remain confident in the cash-generating nature of Adani’s assets and the conglomerate’s strong government ties in India.

“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. “Banks like MUFG and SMFG, which view India as a crucial growth market, are unlikely to substantially reduce their overall India exposure, though they may tighten processes or raise risk premiums for certain deals.”

Spokespeople from the Japanese lenders declined to comment, as did representatives for the Adani Group.

Barclays and Other Global Players Reassess

Contrasting the Japanese stance, Barclays Plc, a longtime financial partner of Adani, has temporarily suspended new loans and financing for the conglomerate. This decision follows the lender’s gradual reduction of its exposure since Hindenburg Research accused Adani of fraud in 2022. Despite this, Barclays facilitated a $394 million trade-finance facility and a $409 million bond sale for Adani units last year.

Similarly, Jefferies Financial Group Inc., which initially stood by Adani after the Hindenburg allegations, has not engaged in new business dealings following the bribery charges. The firm is waiting for a definitive outcome from the investigations before making further decisions. Jefferies clarified that its Adani-related holdings were minimal and primarily as part of market-making operations.

Middle Eastern Banks Remain Unshaken

Middle Eastern financial institutions, including Emirates NBD Bank PJSC, have echoed the Japanese banks’ confidence in the Adani Group. These banks, known for their access to low-cost capital, have no plans to withdraw from existing commitments and are open to funding future Adani projects.

“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 Ashika Stock Broking Ltd. “This creates a synergistic fit with asset-heavy Indian conglomerates like Adani, which offer a robust growth outlook.”

Financial Impacts on Adani

The US indictment has taken a toll on Adani Group’s finances, with its dollar bonds and stocks experiencing immediate declines. Credit rating agencies, including S&P Global Ratings, Moody’s, and Fitch, downgraded the outlook for several Adani companies to negative, citing concerns over financing access and rising costs. Fitch even warned of a potential downgrade to junk status for Adani Ports & Special Economic Zone Ltd.

Adani Enterprises’ shares plummeted by 23% on November 21 but have since partially recovered after the company stated that Gautam Adani and his associates had not been charged under the US Foreign Corrupt Practices Act.

Other global entities are distancing themselves from the conglomerate amid rising uncertainties. TotalEnergies SE announced it would halt new investments in Adani Group until the allegations are resolved. Kenya recently canceled two Adani contracts valued at $2.6 billion.

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