The fallout from the Adani Group turmoil might have political implications for India, stated a chief Asia Pacific economist at Natixis, a analysis group.

While company governance points have an effect on international locations globally, what’s totally different concerning the Adani case for India is that its “highly political,” Alicia Garcia Herrero informed CNBC’s “Squawk Box Asia” on Tuesday. 

This is particularly true now, she famous, since the country’s Supreme Court has launched an investigations into the Adani Group‘s allegations.

Indian billionaire founder Gautam Adani has been underneath scrutiny after allegations in January from U.S. short-seller agency Hindenburg Research that accused the Adani Group of firms of fraud.

The Adani Group has denied any wrongdoing, however it didn’t cease the market rout that worn out roughly $140 billion in market worth from the seven largest listed firms underneath the conglomerate. Adani, India’s high industrialist, has since lost his crown as Asia’s wealthiest man.

Investor considerations over Adani’s governance issues will possible be brief time period, stated Herrero.

However, the long-term political fallout for India stays to be seen, the economist stated. Given the shut ties between Adani and Prime Minister Narendra Modi, its nonetheless unclear whether or not the turmoil might damage the Indian chief politically, Herrero stated.

The image could possibly be get additional sophisticated by India’s G-20 presidency this year.

“I would argue, if things have to be pushed further and there [are] closer linkages, in terms of how this falls out with Modi — it can become highly difficult, given the G-20 and of course, in the run up to the elections,” stated Herrero.

“That’s why we need to watch because it goes beyond the group in a way” by way of “what the consequences for India might eventually be,” she famous.

Her feedback come after India’s Supreme court last week formed a panel to investigate if there have been regulatory failures associated to allegations in opposition to the Adani Group, after the Hindenburg report.

India’s high court docket additionally directed the nation’s markets regulator, the Securities and Exchange Board of India, to probe “whether there was any manipulation of stock prices in contravention of existing laws,” the court docket order stated. SEBI was ordered to conclude the investigation in two months and file a standing report.

Adani’s fall has sparked renewed scrutiny on his close ties with Modi. Both males hail from India’s Western state of Gujarat. Adani was an early supporter of Modi’s political aspirations and championed the Indian leader’s growth vision for the nation.

Last month, billionaire investor George Soros stated the Adani turmoil will vastly weaken Modi’s grip on energy and result in a “democratic revival” within the nation.

“Modi and business tycoon Adani are close allies; their fate is intertwined. Adani Enterprises tried to raise funds in the stock market, but he failed,” Soros said at the 2023 Munich Security Conference. 

“Adani is accused of stock manipulation and his stock collapsed like a house of cards. Modi is silent on the subject, but he will have to answer questions from foreign investors and in parliament.”

The Adani Group didn’t reply to CNBC’s request for remark.

Given the political overtones of the Adani case, “we are seeing very different behavior across the investor landscape,” stated Herrero. Sovereign wealth funds within the Gulf and the U.S. appear to be extra in favor of the embattled Adani Group, she added.

“We have sovereign wealth funds … basically in a way supporting, certainly in the Gulf. And then we have specific investors in the U.S. as we just heard,” stated Herrero. She was referring to the current funding by U.S.-based GQG Partners, which purchased shares worth $1.87 billion investment in 4 Adani portfolio firms.

Rajiv Jain, the co-founder and CIO of GQG Partners, which has $92 billion of property underneath administration as of end-January, informed CNBC his firm was betting on the Adani group, regardless of the continuing turmoil.

“Controversy is part of how you get better returns,” Jain told CNBC in an exclusive interview.

When requested about India’s Supreme Court ordering an investigation into Adani’s enterprise, Jain stated the regulatory threat was “low.”

“Business regulation tends to be a risk … nothing is a zero probability, but I think it’s a low enough probability for us to invest.”

—  CNBC’s Seema Mody contributed to this report