JP Morgan released a report on Tuesday affirming that due to the high level of transparency in various renewable energy tenders in India, the potential for corruption and bribery appears “highly unlikely” for the Adani Group. The global brokerage firm stated that despite recent reports of potential bribery investigations involving an Adani Group entity and Azure Power Global by prosecutors from the US Attorney Office and Justice Department, it maintains its stance on the global conglomerate.
In its latest note, JP Morgan analyzed the legal basis of the investigations and their potential impact. It emphasized that the lack of detailed information and uncertain outcomes of the investigations might not result in successful prosecution, hence, the financial and fundamental impact is likely to be limited. As a result, JP Morgan stated that it will not alter its recommendations for the Adani Group at this stage. However, for Azure Power, the firm shifted its stance to Neutral due to tight valuations amidst the ongoing scrutiny.
The report highlighted a Bloomberg article alleging that an Adani Group entity might have been involved in offering payments to officials in India for favorable treatment on an energy project. It suggested that this entity could potentially be Adani Green Energy, given its profile of USD bond issuers. The article also implicated Azure Power in the same context, possibly linked to a joint solar energy project with SECI signed in January 2020.
Despite these allegations, JP Morgan expressed confidence in the transparency of the renewable energy tendering process in India, reducing the likelihood of significant corruption and bribery. The firm emphasized that even if the reported investigations escalate to prosecution and establish instances of bribery, the financial impact would likely be minimal.
Regarding Azure Power, JP Morgan stated that it remains comfortable with the company’s fundamentals, noting the recent bond buyback as evidence of continued strong operating cash flows.
