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Wednesday, October 4, 2023

Gautam Adani’s Bench Bankers at Barclays Turn Cautious After Hindenburg Report

MUMBAI: For more than a decade, Barclays Plc has been the go-to bank for Indian billionaire Gautam Adani, building on a relationship forged when only a few global companies worked with the emerging conglomerate.
An explosive report from short seller Hindenburg Research in January changed all that, prompting the bank to reduce its exposure, burning a hole in an Indian business that has been a key driver of the firm’s Asian growth for years.
Executives at the highest levels are examining ties to Adani, becoming more cautious about adding new businesses pending a regulatory investigation that is supposed to end next month, according to people familiar with the matter. While Barclays has not 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 woes highlight the delicate balance global banks face in supporting lucrative but potentially risky clients in markets like India. Barclays’ revenues in Asia have more than doubled in the last six years, led by India.
“It’s a very tough choice as Adani can win and banks certainly want to partner with winners,” said emerging markets investor Mark Mobius of Mobius Capital Partners LLP. “The amounts are so large that it is difficult for a bank to exit the relationship.”
The withdrawal is creating tensions within the company, said the people, who asked not to be named discussing private matters. Bankers in India want to revive the lucrative relationship with Adani after the group’s business dried up. Executives in London are more cautious, citing reputational risks, they said.
Adani has denied the accusations made by Hindenburg. The group said in a statement to Bloomberg News that Barclays is among its top 12 relationship banks, and all are secure in their investments and exposure to Adani’s portfolio companies. Lenders continue to have a “strong association with us” even after the Hindenburg report, 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 spokesman said the bank does not comment on “rumor and speculation, but we note that there are many factual inaccuracies.” They gave no further details.
barclays ties
While many global firms, from Standard Chartered to Mitsubishi UFJ Financial Group Inc and Deutsche Bank AG, have stepped up in recent years to help finance Adani as the billionaire’s empire grew, Barclays’ ties to the group have deepened. stand out. The UK firm was among the first international lenders to establish ties with Adani in India, and is the only major Asia-Pacific-based bank in the country.
It has been a lucrative relationship until the recent withdrawal. Barclays was the group’s top overall bond arranger between 2016 and 2021, and has been among the top loan providers, behind Standard Chartered, MUFG and others. The firm has also ranked first in India for merger advisory for the past year.
Commissions for arranging bond sales and lending to Adani and other Indian groups like Mukesh Ambani’s Reliance Industries Ltd have helped the bank boost its Asian revenue to more than 5% of its total, from just 2.5% ago. five years, even as a business for some rivals in the region it has grown more slowly, according to data compiled by Bloomberg.
In an April interview with Bloomberg Television, Barclays CEO CS Venkatakrishnan said Adani “seems to have taken a lot of steps to improve his own financial position, so that’s good.”
Venkatakrishnan, a native of India, said the bank will continue to invest in the country.
“For a long time we have had a very strong investment banking presence in India, it has contributed a lot to us,” he said.
India’s importance to Barclays was demonstrated in 2016 when then-CEO Jes Staley met Prime Minister Narendra Modi. Staley was reported to have said during his visit that the company planned to increase its back-office operations in the country and prepare for future growth there.
Barclays CEO on earnings, business income, banking turmoil
Barclays’ business in India flourished under the leadership of Jaideep Khanna, a 22-year veteran of the bank who was appointed head of Asia-Pacific in 2017. Unlike most Asian bank managers based in Hong Kong or Singapore, Khanna runs the unit from his office on the eighth floor of Ceejay House in Mumbai, one of the main buildings in the Indian financial center.
Khanna’s base has helped Barclays maintain close ties with the growing ranks of India’s corporate giants, with Adani topping the list. While he has a team managing the group’s relationship, Khanna is Adani’s speed-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 based in India, which gives you an idea of ​​how important India is,” Khanna said in a 2021 interview with Bloomberg.
Barclays’ ability to take further exposure to India through equity-backed loans and credit picked up after its local unit received a $400m capital injection two years ago, the biggest since it entered the country in 1990, according to people close.
Barclays has more than 24,000 employees in India, more than in any other country outside the UK, including thousands of call center employees. That makes it one of the largest employers of international banks in India. Among Barclays’ global units, India ranked fourth by revenue last year, behind only the UK, US and Ireland. India’s business, which also includes corporate and private banking, is more than twice the size of Singapore and Japan.
More recently, Barclays was one of the leading bankers, along with Deutsche Bank and Standard Chartered, that helped finance Adani’s $6.5bn deal to buy Holcim’s cement assets in India, the group’s biggest acquisition.
Barclays was a “reliable sounding board” in the Holcim purchase, providing some of the financing and merger advice, Jugeshinder “Robbie” Singh, Adani’s chief financial officer, said in an interview last year with the Economic Times of India.
Adani’s response after the Hindenburg report where he cites Barclays, Deutsche, Standard Chartered as the main banks underwriting the 420 billion rupees ($5 billion) for Holcim financing
That acquisition pushed Barclays to the top of India’s merger advisory rankings for the 12 months to 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 Adani deals. The group has yet to sell an offshore bond since the Hindenburg report and, like many companies, had already been switching to borrowing after borrowing costs rose in the capital markets.
In a statement to Bloomberg, Adani said Barclays ranked eighth in terms of exposure to Adani’s portfolio companies as of March 31. He did not clarify his definition of exposure.
Most of Barclays’s links with Adani have been through his investment bank, arranging sales of bonds and loans that are not on its balance sheet, or are subsequently sold. The most exposed banks that directly hold Adani’s debt include Japanese and Middle Eastern banks, the people said.
Adani’s stocks and bonds have recouped some of the losses after the group received an investment from GQG Partners Inc., and an interim report by an Indian judicial panel in May found no evidence of share price manipulation as alleged. the American short seller.
The group has also bought back some bonds and is trying to sell shares and repay loans to bolster its balance sheet. It has already paid bankers $200 million of a $1 billion interim loan for Holcim’s assets, the people said. Barclays, Deutsche Bank and Standard Chartered provided the original loan. Adani also paid off a $500 million bridging loan from those banks in March for the Holcim purchase after some lenders refused to refinance.

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