“It’s FTX to the power of 10, worse than Enron in 2001”, blows a slightly worried banker. Among the biggest frauds in history, the Adani affair could well rise to the top of the world podium. For nearly a week, the entire financial world has had its eyes riveted on India, where the collapse of the country’s largest conglomerate, Adani Group, owned by billionaire Gautam Adani, has been making headlines.
Originally, the publication Wednesday, January 25 of a very heavy vitriolic report on the financial health of the group signed by Hindenburg Research, an American activist fund specializing in short sales. This fund, accustomed to flash campaigns, bets on falling stock prices. Supporting figures, Hindenburg maintains that the Adami empire would in fact be the biggest scam in history: large-scale corruption, money laundering, financial manipulation, tax evasion… The conglomerate would have used fictitious offshore entities in particular in tax havens in the Caribbean “with the apparent aim of generating fictitious or illegitimate turnover and diverting money from listed companies”.
70 billion dollars gone up in smoke
Allegations that the Indian group immediately denied. “This is not just an unwarranted attack on any specific company, but a calculated attack on India, the independence, integrity and quality of Indian institutions, and the history of the India’s growth and ambition,” the group said in a lengthy statement. The conglomerate’s chief financial officer even went so far as to compare this attack to the massacre of Jallianwala Bagh, during the colonial era, when a British officer ordered around 50 Indian army soldiers to fire on civilians unarmed, causing the death of 379 Indians… If the case is so sensitive, it is because Gautam Adani is one of those very close to President Narendra Modi and that the construction of his empire in infrastructure, ports, energy or yet the media owes much to this political proximity.
Still, the financial impact is considerable. Since the publication of Hindenburg Research, the prices of the 7 listed companies of the Adani empire have collapsed and in total nearly 70 billion dollars of market capitalization have gone up in smoke. And their downside potential could be around 85% according to Hindenburg… Gautam Adani, himself, not so long ago ranked third among the richest men in the world according to the Forbes, was demoted to eighth place within a week.
A privileged partner for TotalEnergies
The case could end there if it did not potentially have dire consequences in France. For years, TotalEnergies has made India and its partnerships with the Indian group one of the major axes of its strategy of diversification into renewable energies. And the mergers and participations of the French group in the subsidiaries of Adani have multiplied over the years. Thus, in October 2019, TotalEnergies announced a 37.4% stake in Adani Gas, one of the country’s main gas distributors, and partnerships in major LNG import and regasification terminals.
Initial investment cost: 600 million euros. In 2021, the French group this time took a 20% stake in Adani Green Energy Limited (AGEL), one of the world’s leading solar energy developers, for an amount of $2.5 billion. At the time, TotalEnergies wrote in its press release: “The partnership with AGEL in renewables in India will contribute to Total reaching its target of 35 GWp of gross renewable capacity in 2025 and growth of 10 GWp per year beyond”. Finally, Rebelote, in June 2022, where the French group acquired 25% of Adani New Industries Limited (ANIL) to develop and market green hydrogen. Also in a press release, TotalEnergies justifies this stake “as a major step in the group’s low-carbon hydrogen strategy”.
Asked by The Express, the TotalEnergies group refused to comment on the recent affair and the accusations of the American activist, stressing that “the investments in Adani’s entities have been made in the strictest respect of the applicable laws, in particular Indian, and our internal governance processes”. How much would TotalEnergies have lost in this case? “We are in the process of doing an audit,” confirmed an internal source. A “misadventure” which adds to the dry losses of the energy company in Russia. If they remain thin compared to the record profits of the French group, the Adani affair could further darken the already tarnished image of the French champion.