India’s Adani Group has withdrawn its request for a $553 million loan from the United States International Development Finance Corporation (DFC). The loan was intended to finance the construction of a deep-sea port in Sri Lanka, located next to a Chinese-run facility. This move comes after a significant indictment in New York accused the conglomerate’s founder, Gautam Adani, of misleading international investors.
Adani Ports and Special Economic Zone Ltd. announced on Tuesday that it was pulling back its request for the loan. The company clarified that the Colombo West International Terminal project was still progressing well and on schedule for completion by early next year. Despite withdrawing the loan request, the company confirmed that the project would be financed through internal funds and capital management.
The deep-sea port project, which carries an estimated cost of $700 million, has drawn attention due to its strategic location. It sits next to a Chinese-run port, which has raised concerns among India and the United States over China’s growing influence in the Indian Ocean.
Strategic Importance of the Project
Sri Lanka’s geographical location in the Indian Ocean has made it a vital maritime asset. The island nation is positioned along one of the world’s busiest shipping routes, linking the Middle East to East Asia. This strategic position has made Sri Lanka’s ports highly attractive to global powers, especially India and China.
India and the US have previously voiced concerns about China’s growing presence in Sri Lanka, particularly in relation to the Hambantota port, which some fear could give Beijing a military foothold in the region. The Adani Group’s project in Colombo was seen as a counter to China’s influence.
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Legal Troubles and Investigations
The timing of the withdrawal follows a major legal setback for the Adani Group. In November, Gautam Adani and senior officials of the group were indicted in the US on charges of misleading investors as part of a bribery scheme. This indictment has shaken the conglomerate’s image and led to a significant drop in its market value.
In response to the indictment, Sri Lanka launched an investigation into the Adani Group’s local projects. These include the Colombo port project as well as a $442 million wind power deal. The investigation has further complicated the conglomerate’s operations in the region.
Financial Impact
The Adani Group has faced severe financial consequences in the wake of the indictment. The company has reported a loss of nearly $55 billion in market value, largely due to a stock market rout. The financial setback comes on top of a similar crisis faced by the group in 2023, following allegations of corporate fraud by short-seller Hindenburg Research.
In 2023, the conglomerate saw $150 billion wiped off its market value after Hindenburg accused it of engaging in “brazen” corporate fraud. The allegations and subsequent stock crash have raised questions about the group’s corporate governance practices.
Future of Adani Group’s Projects
Despite these setbacks, Adani Group has maintained that it will continue with its projects, including the Colombo West International Terminal. The company has indicated that the port will still be completed on schedule, without reliance on the US-backed loan.
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