Jefferies, once key to Adani’s equity push, reviews ties amid bribery charge

US investment bank Jefferies has found itself at the centre of a storm surrounding its relationship with Indian billionaire Gautam Adani’s business empire. Once known for its strategic gains, this bond faces scrutiny following the US’s fraud and bribery allegations against one of the Adani Group companies.

The Financial Times, in a report on Tuesday (November 26), said Jefferies played a crucial role in stabilising the Adani Group after a damning report from US short-seller Hindenburg Research in January 2023. Accused of stock manipulation and accounting fraud, the Adani Group faced a crisis of investor confidence. Despite these allegations, Jefferies brokered a $1.9-billion capital boost for the conglomerate, partnering with Florida-based GQG Partners in a high-profile deal.

Jefferies’ rapid expansion in India

The bank’s public endorsement of this move, hailing it as a “compelling long-term value investment”, marked a significant gamble that has paid off in terms of Jefferies’ rapid expansion in India. In a few short years, Jefferies has climbed the ranks to become one of the top investment banks in the country, second only to ICICI, based on equity-raising fees, the Financial Times reported.

Also read: Adani Green Energy shares dip after TotalEnergies declares investment halt

The financial daily said Jefferies’ stakes have risen exponentially since the US Department of Justice indicted the Adani Group concerning an alleged $256-million bribery scheme. The charges relate to Adani Green Energy, under the leadership of Gautam Adani’s nephew Sagar Adani, engaged in alleged corrupt practices to secure solar power supply contracts in India.

While the bank has maintained public silence on its relationship with Adani, the fallout has prompted other significant players, such as French energy giant TotalEnergies, to suspend new investments in joint projects.

“Deeply focused” on Indian market

The Financial Times highlights that Jefferies executives grappled with internal debates after the Hindenburg report. Despite international scepticism, the bank’s controversial decision to proceed with a planned $2.4-billion Adani share offering underscored its willingness to take significant risks. The offering was eventually pulled after investors largely withdrew; yet Jefferies managed to line up one foreign buyer, demonstrating its determination to support the Adani Group.

Such moves reflect the bank’s strategic focus on India, which Jefferies India head Aashish Agarwal described as a market where the firm is “deeply focused”. Over the past three years, Jefferies has undertaken 50 transactions in India, including six to seven involving GQG and Adani companies, the FT reported.

Also read: Adani touts financial muscle, shows can grow without external debt

A delicate balancing act

With the US indictments now looming, Jefferies faces a delicate balancing act. Public filings show that around mid-2023, Jefferies held a 3 per cent stake in Adani Transmission, though its more recent position remains to be determined. The bank continues to rate Adani Green as a “buy”, citing the company’s capital management and ambitious solar projects in Gujarat. However, Adani Green’s shares have plummeted more than 45 per cent since July, reflecting broader investor concerns.

Jefferies’ leadership, which previously lauded its partnership with Adani, appears to be recalibrating. The Financial Times has quoted insiders suggesting that future business with the Adani Group will be assessed “case by case”, signalling a more cautious approach.

U-turn

The newspaper said that as recently as last month, a senior Jefferies executive was privately touting its relationship with Adani as a success. However, a person close to the bank said it would now consider future business with the group case by case, indicating the difficult line it is now trying to tread.

Watch: Is Adani’s indictment bigger than Hindenburg crisis? | Capital Beat

In the past, the bank publicly expressed solidarity with Adani. “One year ago, we began a business relationship with Gautam Adani. Today we are proud to be true partners,” Jefferies chief executive Rich Handler posted on the social media platform X earlier this year. The post has since been deleted, the FT pointed out.