Adani’s go-to bankers at Barclays turn cautious after Hindenburg report

Written by Suvashri Ghosh and Antony

For more than a decade, Barclays plc has been the bank of choice for Indian billionaire Gautam Adani, benefiting from a relationship forged when few global companies were doing business with the fledgling conglomerate.

An explosive report from Hindenburg Research in January changed all that, prompting the bank to reduce its exposure, leaving a hole in the Indian business that had been a key driver of the company’s Asian growth for years.

Executives at the highest levels are scrutinizing ties to Adani, and are becoming more cautious about adding new business pending a regulatory investigation that is supposed to conclude next month, according to people familiar with the matter. While Barclays hasn’t closed the door on the group, it has negotiated repayments on some loans, including financing a massive cement deal last year with Holcim AG, the people said.

Adani’s problems highlight the delicate balance facing global banks as they support lucrative but potentially risky clients in markets such as India. Barclays’ revenues from Asia have more than doubled in the past six years, with India leading the way.

“It’s a very tough choice because Adani could be the winner and the banks definitely want to be associated with the winners,” said Mark Mobius, emerging markets investor from Mobius Capital Partners LLP. “The amounts are so large that it is difficult for the bank to get out of the relationship.”

The people, who asked not to be identified discussing private matters, said the withdrawal creates tensions within the company. Bankers in India want to revive Adani’s lucrative relationship after the group’s business has dried up. London executives are more cautious, they said, citing reputational risks.

Adani denied Hindenburg’s allegations. In a statement to Bloomberg News, the group said Barclays is among 12 primary relationship banks, all of whom are secure in their investments and exposure to Adani’s portfolio companies. Even after the Hindenburg Report, lenders still have a strong relationship with us, Adani said, citing bank financing last month for a data center. Barclays was not part of that lending group, which included ING Bank NV, Mizuho Bank, MUFG Bank, Natixis SA, Standard Chartered Plc, and Sumitomo Mitsui Banking Corp.

A Barclays spokesperson said the bank does not comment on “rumor and speculation, but we note that there are many factual inaccuracies.” They did not go into detail.

Barclays Relations

While many global companies – from Standard Chartered to Mitsubishi UFJ Financial Group Inc. And Deutsche Bank AG has stepped forward in recent years to help finance Adani As the billionaire’s empire grows, the Barclays’ links to the group stand out. The British company was among the first international lenders to establish relationships with Adani in India, the only major Asia-Pacific bank based in the country.

It was a profitable relationship until the final backtracking. Barclays ranked first in the group’s bond ranking from 2016 to 2021 and was among the leading loan providers, behind Standard Chartered, MUFG and others. The firm also ranked as the number one merger advisory firm in India during the past year.

In an interview with Bloomberg TV in April, Barclays CEO CS Venkatakrishnan said Adani “seems to have taken a lot of steps to improve his financial situation, and that’s a good thing.”

A native of India, Venkatakrishnan said the bank will continue to invest in the country.

“We have long had a very strong investment banking presence in India and it has worked really well for us,” he said.

India’s importance to Barclays has been apparent since 2016 when then-CEO Jess Staley met Prime Minister Narendra Modi. Staley was quoted as saying during his visit that the company plans to increase its back-office operations in the country and prepare for future growth there.

Barclays’ business in India is thriving under the leadership of Jaideep Khanna, the 22-year-old veteran who was named president of Asia Pacific in 2017. He unites from his eighth-floor office in Mumbai’s Ceejay House, one of the main buildings in India’s financial hub.

Khanna’s base has helped Barclays maintain close ties with the ranks of India’s growing corporate giants, with Adani at the top of the list. While he has a team handling the group’s relationship, Khanna is Adani’s quick-dial banker for major financing deals, the people said.

Barclays “is probably the only international bank of our size and stature that has a regional CEO in India – and that gives an idea of ​​how important India is,” Khanna said in an interview with Bloomberg in 2021.

Barclays’ ability to take on more exposure in India through equity-backed loans and credit picked up after its domestic unit received a $400m capital injection two years ago – the largest since entering the country in 1990, according to people familiar with the matter.

Barclays has more than 24,000 employees in India, more than in any other country outside the UK, including thousands of call center staff. This makes it one of the largest employers of international banks in India. Among Barclays’ global units, India ranked fourth in terms of revenue last year, behind the United Kingdom, the United States and Ireland. Business in India, which also includes corporate and private banking, is more than twice as large as business in Singapore and Japan.

Most recently, Barclays was one of the key bankers, along with Deutsche Bank and Standard Chartered, who helped fund Adani’s $6.5 billion deal to buy Holcim cement assets in India, the group’s largest acquisition.

Jugeshinder “Ruby” Singh, Adani’s chief financial officer, said in an interview last year with the Economic Times of India that Barclays had been a “trusted council” on the Holcim buyout, providing part of the financing as well as merger advice.

That acquisition catapulted Barclays to the top of India’s merger advisory rankings in the 12 months through April, ahead of JPMorgan Chase & Co., according to data compiled by Bloomberg.

The challenge for the bank now is to find new sources of revenue in India with fewer deals than Adani. The group had not yet sold offshore bonds since the Hindenburg report and, like many companies, had already turned to loans after borrowing costs rose in the capital markets.

In a statement to Bloomberg, Adani said Barclays had the eighth largest exposure to Adani’s portfolio companies as of March 31. He did not clarify his definition of exposure.

Most of Barclays’ relationships with Adani were through his investment bank, arranging sales of bonds and loans not held on his balance sheet – or subsequently sold. People said that the banks with greater exposure that hold Adani’s debt directly include Japanese and Middle Eastern banks.

Adani shares and bonds compensated part of the losses after the group received an investment from GQG Partners Inc. An interim report from an Indian court panel in May found no evidence of share price manipulation as alleged by the US short seller.

The group has also bought back some bonds and is seeking to sell shares and repay loans to boost its balance sheet. People said he had already paid off bankers $200m of a $1bn mezzanine loan for Holcim’s assets. Barclays, Deutsche Bank and Standard Chartered provided the original loan. Adani also paid off a $500m bridging loan from those banks in March for the Holcim purchase after some lenders refused to refinance.