Japanese Banks Continue Support for Adani Amid US Bribery Charges

Japan’s largest banks are committed to maintaining their relationships with billionaire Gautam Adani, despite bribery charges filed in the United States. This comes as other global financial institutions, such as Barclays Plc, reconsider their exposure to the Indian business magnate’s conglomerate.

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Mizuho Financial Group Inc. believes that the recent developments concerning Adani will not have lasting effects, and the bank plans to continue supporting his group. Sources familiar with the matter also confirmed that Sumitomo Mitsui Financial Group Inc. and Mitsubishi UFJ Financial Group Inc. do not intend to withdraw their backing and remain open to offering new financing if necessary.

Representatives from all three Japanese banks declined to comment, and an Adani Group spokesperson did not immediately respond.

The ongoing support from Japanese lenders highlights a contrast in how global financial institutions are reacting to the bribery accusations against Adani, who, along with others, faces allegations of organizing a $250 million bribery scheme to secure government solar energy contracts in India. Adani’s sprawling conglomerate, involved in sectors from ports to power, has denied the accusations, calling them unfounded. The group has been meeting with investors and lenders to clarify its position and reassure stakeholders.

Although the likelihood of fresh financing requests from Adani appears low for the moment, some global banks, concerned about reputational risks, are limiting their exposure to the Indian group. In contrast, Japan’s banks, with a focus on cash-generating assets, remain confident in their backing. They also expect any legal actions by the US to be a prolonged process.

"Japanese banks have refined their approaches to emerging-market risks, particularly in Southeast Asia, following the lessons learned from the 1990s Asian financial crisis," said Ben Charoenwong, assistant professor of finance at Insead, Singapore. "For institutions like MUFG and SMBC, India remains a critical market, so they’re unlikely to significantly scale back their investments, though they might adjust their risk management strategies."

Meanwhile, Barclays has halted offering new loans or financing to Adani Group, as sources familiar with the matter noted. The UK bank had already been reducing its exposure to Adani since Hindenburg Research’s short-seller report last year, which criticized the conglomerate’s financial practices. However, Barclays had still participated in a $394 million trade-finance deal for an Adani unit and co-managed a $409 million bond issue for Adani Green Energy Ltd. earlier in 2024.

A Barclays spokesperson declined to comment on its dealings with Adani or its relationship status with the group.

Jefferies Financial Group Inc., which previously supported Adani after the Hindenburg report, has refrained from discussing new business following the recent US charges. The bank has not yet made a decision regarding whether it will suspend or terminate its dealings with Adani and is waiting for the resolution of the legal proceedings before making further moves. Jefferies had briefly held Adani shares on its balance sheet but only in the capacity of a market maker, not as an investment. The Adani Group represents under 4% of Jefferies' business in India, according to sources.

Jefferies’ India division was involved in brokering a $1.9 billion share sale in Adani companies to GQG Partners and managing a $500 million equity raise for Adani Enterprises and other companies in recent months. A representative for Jefferies declined to provide a comment.

Several major US banks, which had been exploring debt financing options with Adani Group, have paused their efforts in light of the recent legal developments, sources reported.

Japanese banks, which recently raised their annual profit forecasts, have been key players in several significant bond issues by Indian firms, including Adani Group. They were also part of a planned $600 million bond offering by Adani Green Energy, which was ultimately canceled after the charges became public.

Mizuho has expressed little concern over the investigation, emphasizing that the group has not defaulted on any payments, and it continues to finance steady cash-generating assets such as Adani’s ports and airports. Sumitomo and Mitsubishi UFJ also have confidence in Adani’s ability to repay loans and do not expect significant disruptions to their businesses.

In addition to Japanese institutions, some Middle Eastern banks, such as Emirates NBD Bank, are not fazed by the legal situation and have no plans to withdraw from existing commitments. These banks are willing to continue financing future Adani projects after conducting their usual due diligence. Emirates NBD declined to comment on the matter.

"Japanese and Middle Eastern banks, with their access to cost-effective capital, are seeking global growth opportunities, which aligns well with asset-rich Indian conglomerates like Adani, offering a strong growth outlook," said Ashutosh Mishra, head of research at Ashika Stock Broking Ltd.