Japanese Banks Maintain Support For Adani Group: Report
Mizuho Financial Group believes the latest developments involving Adani will not have a lasting impact and intends to continue supporting the group, according to a report
Japan’s largest banks plan to maintain their ties with billionaire Gautam Adani, despite the recent US bribery charges, even as other global firms, including Barclays Plc, are reconsidering their exposure to the Indian conglomerate.
Mizuho Financial Group believes the latest developments involving Adani will not have a lasting impact and intends to continue supporting the group, according to a Bloomberg report citing sources familiar with the matter. Similarly, Sumitomo Mitsui Financial Group Inc. and Mitsubishi UFJ Financial Group Inc. have no plans to sever their connections and remain open to providing new financing if needed in the future, the sources added in the report.
The Japanese banks' continued support highlights the divide within the financial sector over Adani, following charges that he and others were involved in a $250 million scheme to bribe Indian government officials in order to secure solar energy contracts. Adani’s vast ports-to-power conglomerate has denied the allegations, calling them baseless. The company’s representatives have been meeting with lenders and investors to clarify its position and provide reassurance.
While the Adani Group is unlikely to seek new financing requests in the immediate future, some global banks, concerned about reputational risk, are reducing their exposure to one of India’s largest conglomerates. However, Japan's capital-rich lenders are reassured by their support of cash-generative assets. Adani has strong government connections, and any legal proceedings initiated by the US are expected to take a long time, as per the report.
"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 in Singapore. Banks like MUFG and SMBC, which see India as a key growth market, are unlikely to significantly reduce their overall exposure to India, though they may tighten procedures or increase risk premiums for certain deals, he added in the report.
Meanwhile, Barclays, a long-time lender to Adani, has suspended new loans and financing for the group, according to sources in the report. The British bank had already been scaling back its exposure to direct lending and bond underwriting after short-seller Hindenburg Research criticized the company last year. However, Barclays still provided part of a $394 million trade-finance facility last year to an Adani unit for a solar module plant. Earlier this year, Barclays also acted as a bookrunner for a $409 million bond sale by Adani Green Energy Ltd.
Jefferies Financial Group, which supported Adani after Hindenburg’s fraud allegations, has not yet engaged in any new dealings with the group following additional accusations that emerged after the US indictment, as per the report. The bank has not made a formal decision on whether to pause or halt its involvement and is waiting for a clear resolution of the charges before considering new business with Adani.
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