Japanese banks maintain support for Adani Group: report

Japan’s biggest banks plan to maintain their ties to billionaire Gautam Adani, despite recent accusations of corruption in the United States, even as other global companies, including Barclays Plc, reconsider 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 ties and remain open to providing new financing if necessary in the future, the sources added in the report.

Continued support from Japanese banks highlights division within the financial industry over Adani, following accusations that he and others were involved in a $250 million scheme to bribe government officials Indian company in order to obtain solar energy contracts. The vast Adani ports conglomerate has denied the allegations, calling them baseless. Company representatives met with lenders and investors to clarify their position and reassure them.

While Adani Group is unlikely to seek new financing requests immediately, some global banks, concerned about reputational risk, are reducing their exposure to one of India’s largest conglomerates. However, capital-rich Japanese lenders are reassured by their support for cash-generating assets. Adani has close ties to the government and any legal proceedings initiated by the United States are expected to take a long time, the report said.

“Building on their experiences in Southeast Asia in the 1990s, Japanese banks have developed sophisticated frameworks for assessing emerging market risks,” said Ben Charoenwong, assistant professor of finance at Insead Singapore. . Banks like MUFG and SMBC, which view India as a key growth market, are unlikely to significantly reduce their overall exposure to India, although they could tighten procedures or increase risk premiums for certain transactions, he added in the report.

Meanwhile, Adani’s long-time lender Barclays has suspended new loans and financing from the group, according to the report’s sources. The British bank had already reduced 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 bookrunner for a $409 million bond sale by Adani Green Energy Ltd.

Jefferies Financial Group, which backed Adani after the Hindenburg fraud allegations, has yet to enter into new relationships with the group following other accusations that emerged after the U.S. indictment, the report said. The bank has not made a formal decision on whether to suspend or cease its involvement and is awaiting a clear resolution of the accusations before considering new contracts with Adani.