Japanese banks sticking with Adani as Jefferies, Barclays review ties

MUMBAI – Japan’s biggest banks plan to maintain ties to billionaire Gautam Adani despite US bribery charges, even as other global companies including Barclays are reassessing their exposure to the Indian conglomerate.

Mizuho Financial Group expects

the latest saga surrounding Adani

will not have a long-lasting impact and intends to continue supporting the group, according to sources.

Sumitomo Mitsui Financial Group and Mitsubishi UFJ Financial Group also have no plans to pull back and will be open to fresh financing if needed later, the sources said.

The Japanese support underscores the divide among finance firms over Adani after he and others were charged with plotting a US$250 million (S$336 million) scheme to bribe India government officials to win solar energy contracts.

Adani’s massive ports-to-power group has denied the charges and called the allegations baseless. Its representatives have been meeting with lenders and investors to reassure them and explain its stance on the matter. 

While it is unlikely there will be new financing requests by the group for now, some global banks that are concerned about reputational risk are curbing their exposure to one of India’s biggest conglomerates.

The capital-rich Japanese lenders take comfort that they are backing cash-generative assets.

Adani has strong government ties and any legal processes brought by the US will take a long time, according to the sources. 

“Drawing from their experiences in South-east Asia in the 1990s, Japanese banks have developed sophisticated frameworks for evaluating emerging-market risks,” said assistant finance professor Ben Charoenwong from Insead in Singapore, about the lenders’ risk tolerance in the aftermath of the Asian financial crisis.

“Banks like Mitsubishi UFJ Financial Group and Sumitomo Mitsui Banking Corporation, 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. 

Meanwhile, Barclays, which has long been a go-to bank for Adani, has suspended extending new loans or financing to the group for now, according to people familiar with the matter.

The British lender had been gradually decreasing its exposure in direct lending and bond underwriting since short seller Hindenburg Research took aim at the company in 2023, Bloomberg News earlier reported.

Still, it provided part of a US$394 million trade-finance facility in 2023 to an Adani unit for a solar module plant.

Earlier this year, Barclays was among book runners for a US$409 million bond sale by Adani Green Energy. 

Jefferies Financial Group, which stood by Adani after Hindenburg accused the conglomerate of fraud, has not discussed new dealings with the group after further accusations surfaced following the US indictment, according to sources.

The bank has not made a formal decision on whether to pause or halt deals, and is awaiting a firm outcome from the charges before engaging in new business, the sources said. 

Jefferies held some Adani shares temporarily on its balance sheet as a market maker, but not as an investment in the firm, they said.

The sources added that the Adani Group represents less than 4 per cent of Jefferies’s India business.

The India arm of Jefferies in 2023 brokered a US$1.9 billion sale of shares in four Adani Group companies to GQG Partners, a US-based investment firm.

More recently, Jefferies was a lead manager as the flagship Adani Enterprises and other companies raised US$500 million from stock sales in October.

Meanwhile, at least two other major US banks that were aiming to grab a small share of debt funding from the Adani group in recent months have now put those efforts on hold, according to sources.

Japan’s biggest lenders, which recently raised their annual profit forecasts to fresh records, feature prominently in some of the biggest overseas bond deals in 2024 by Indian companies, including Adani Group, data compiled by Bloomberg shows.

Most recently, they were among the arrangers of a planned US$600 million bond sale by Adani Green that was cancelled after the charges became public. 

Mizuho is not too concerned about the current investigation and has no intention of pulling back from the group, which hasn’t reneged on any payments, the sources said.

Mizuho has helped finance Adani units running ports and airports, which are steady cash generators. 

Sumitomo and Mitsubishi UFJ are confident in the companies’ ability to repay borrowings and do not expect the businesses to be affected much, the sources said.

Like their Japanese peers, some Middle East banks such as Emirates NBD Bank PJSC are equally unfazed about their relationship with Adani, the sources said.

They have no plans to pull back from existing commitments and will lend fresh money for future projects on the back of their regular diligence processes, the sources said, adding that their capital was committed to good assets in the Adani portfolio.

“Japanese and Middle Eastern banks, with access to relatively low-cost capital, are actively exploring global growth and diversification opportunities,” said Mr Ashutosh Mishra, head of research at the institutional desk of Ashika Stock Broking. “This creates a synergistic fit with asset-heavy Indian conglomerates like Adani, which offer a robust growth outlook.” BLOOMBERG