French energy giant TotalEnergies has revealed that the company has an exposure of $3.1 billion to four Indian Adani group entities.
The Adani group, owned by billionaire Gautam Ambani, is in the middle of a financial storm with more than $110 billion-worth of its market capitalisation wiped out in recent weeks, following corporate fraud allegations by the US-based Hindenburg Research.
TotalEnergies recently termed its exposure to Adani Group companies as “limited”, which “represents 2.4% ($3.1 billion at December 31 2022) of the company’s capital employed and only $180 million of net operating income in 2022”, it noted.
The French player said its investments in the Adani group are “being accounted for under the equity method”, and the company has not performed any re-evaluation in its accounts of its stakes in the Indian listed entities.
TotalEnergies clarified that its investments in Adani’s group companies “were undertaken in full compliance” with applicable Indian laws and with the company’s own internal governance processes.
“The due diligences, which were carried out to TotalEnergies’ satisfaction, were consistent with best practices, and all relevant material in the public domain was reviewed, including the detailed disclosures to regulators required under applicable laws,” it stated.
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Audit by Big four
Adani would be mandating one of the Big Four accounting firms to carry out a general audit of its companies, TotalEnergies noted.
The operator’s current stakes in Adani ventures include a 50% interest in Adani Total Private Limited, a 37% stake in Adani Total Gas Limited, another 19.75% stake in Adani Green Energy Limited and a 50% interest in AGEL23.
In 2018, TotalEnergies and Adani Group embarked on an energy partnership with the development of a joint liquefied natural gas business — Adani Total Private Limited (ATPL).
“ATPL aims to develop the Dhamra LNG regasification terminal— which is expected to start operations in Q2 2023 — and to market LNG,” TotalEnergies stated.
TotalEnergies in 2019 announced the acquisition of a 37.4% stake in the Indian listed entity Adani Total Gas Limited, a city gas distribution business. The following year the two groups extended their relationship with the acquisition of a 20% stake by TotalEnergies in Adani Green Energy Limited.
TotalEnergies also picked up a 50% stake in AGEL23 (the balance is owned by the Adani group), which involves a portfolio of 2.3 gigawatts of solar projects in India.
Wide-ranging allegations
The Hindenburg report, released last month, included wide-ranging allegations of corporate malpractice following a two-year investigation into a group the companies of which have enjoyed multiplying valuations in recent years.
Before the recent collapse, Adani chair Gautam Adani boasted a net worth of $105 billion, according to Forbes listings, making him the richest person in Asia and the sixth-richest in the world.
However, as of 5 February, his net worth had dropped to $61.9 billion, according to Forbes, making him the 17th richest person in the world.
Adani rebuttal
The Adani Group earlier responded to the Hindenburg allegations with the release of a 413-page rebuttal of the fraud allegations.
The company claimed that it complies with all local laws and had made the necessary regulatory disclosures.
“The [Hindenburg] document is a malicious combination of selective misinformation and concealed facts relating to baseless and discredited allegations to drive an ulterior motive,” the rebuttal document stated.
Hindenburg on 29 January countered that only 30 pages of Adani’s 413-page rebuttal focused on issues related to the company’s report.
The rebuttal, it added, “largely confirmed Hindenburg’s findings and ignored key questions”.
“We also believe that fraud is a fraud, even when it’s perpetrated by one of the wealthiest individuals in the world,” Hindenburg said.
The Hindenburg report had alleged “brazen stock manipulation and accounting fraud over the course of decades” by the Adani group.