MUMBAI, Jan 31 (Reuters) – Gautam Adani’s landmark $2.5 billion share sale was fully subscribed on Tuesday as investors pumped funds into his flagship firm, despite a $65 billion drop in the Indian tycoon’s stock on reports of a short-seller.
The fund-raising is important for Adani, not only because it will help reduce its group’s debt, but also because it is seen by some as a measure of confidence at a time when the tycoon is facing one of its biggest business and reputational challenges.
A Hindenburg Research report last week alleged concerns about improper use of offshore tax havens and high debt, which Adani denied, but the subsequent market crash led to a dramatic and sudden decline in his fortunes as he fell from third to eighth place on the Forbes rich list. .
India’s largest secondary share sale attracted participation from anchor investors including Maybank Securities and Abu Dhabi Investment Authority, as well as India’s HDFC Life Insurance and state-backed Life Insurance Corp ( LIFI.NS ).
But while the 30% anchor portion of the issue was fully subscribed last week, only 3% of bids were in the book building on Monday amid concerns about shortages in Adani’s stocks.
Overall share selling was fully subscribed by Tuesday as foreign institutional investors and corporate funds flooded in, although participation by retail investors and Adani Enterprises ( ADEL.NS ) workers was low.
“Investors will see the successful completion of the FPO (follow-on public offering) as a welcome relief, as it signifies that the company still has the backing of institutional investors,” said Leonard Law, senior credit analyst at Lucro Analytics Singapore. tuesday
“The FPO will help Adani Enterprises grow its public float (thereby partially addressing the issue of concentrated shareholding among promoters), as well as reduce leverage for the company and improve investor sentiment,” Law added.
The offer comes days after Adani’s public confrontation with Hindenburg Research, which last week raised concerns about the use of tax havens and “insufficient debt” at the group. It added that shares of seven Adani-listed companies fell 85% due to what it called “sky-high valuations”.
The Adani group said it complied with all legal and disclosure requirements, calling the report baseless and that it was considering taking action against Hindenburg.
Adani shares got support for selling even as shares of the flagship closed at Rs 2,973.9, up nearly 3% but below the lower end of the sell price band of Rs 3,112.
Adani Group’s total debt rose 40% to 2.2 trillion rupees ($26.83 billion) in the financial year ending March 31, 2022. Responding to Hindenburg’s allegations, Adani on Sunday said the group had been “totally de-levered” over the past decade.
Adani said the Hindenburg report was a “calculated attack” on India and its institutions, while its CFO compared the market collapse of its stocks to colonial-era genocide.
Hindenburg later said that Adani’s “response largely confirmed our findings and ignored our original questions.”
Retail, corporate needs
When asked about the Adani-Hindenburg saga, India’s Chief Economic Adviser V. Ananth Nageswaran told reporters, “The corporate sector as a whole is reeling and their balance sheets are healthy. So, what happens to a particular corporate group, is a matter between the market. And the corporate group.”
Adani has repeatedly said in recent days that investors stand by it and that the share offer will happen. Bankers at one point considered repricing the issue or extending the sale, Reuters reported.
Most of the demand during the public book building process came from non-institutional investors who invested over Rs 1 million each, with a total bid of five times the shares on offer. The share of qualified institutional buyers, which includes foreign investors, was subscribed 1.2 times.
But domestic financial institutions or banks, as well as domestic mutual funds, did not make any bids. And demand from retail investors and company employees remained muted, garnering bids for 12% and 55% of the shares in the offer.
“The Hindenburg report has impacted sentiment, especially at the retail level. The objective of the FPO was two-fold – to raise funds to reduce debt and to broadbase the shareholding…they have not been able to broadbase the shareholding,” said Mumbai-based independent market analyst Ambarish Baliga.
Adani’s firm held extensive discussions with investment bankers and institutional investors over the weekend and into Monday to attract subscriptions, according to two sources with direct knowledge of the discussions.
The investors have not yet been named, but Abu Dhabi conglomerate International Holding Company ( IHC.AD ) said late on Monday that it would invest $400 million.
Adani Transmission ( ADAI.NS ) closed about 4% higher on Tuesday after losing 38% since the Hindenburg report, while Adani Ports and Special Economic Zone ( APSE.NS ) rose 2.6%.
Adani Total Gas ( ADAG.NS ) fell 10% to its lower price range, while Adani Power ( ADAN.NS ) and Adani Wilmar ( ADAW.NS ) each fell 5%.
Hindenburg said in its report that it has shorted US-bond and Adani Group’s non-Indian trading derivatives. On Tuesday, US dollar-denominated bonds issued by Adani Ports and Special Economic Zones continued their fall for a second week.
M. Reporting by Sriram, Chris Thomas, Aditya Kalra, Jayashree Upadhyay, Shivangi Acharya, Angshuman Daga and Bengaluru Newsroom; Edited by Muralikumar Anantharaman and Alexander Smith
Our standards: Thomson Reuters Trust Policy.
