Adani’s $2.5 billion stock offer was backed by investors, despite a short-seller attack

MUMBAI, Jan 31 (Reuters) – Indian billionaire Gautam Adani’s $2.5 billion share sale was close to being fully subscribed on Tuesday, as investors poured funds into his group a week after its shares fell on a report of heavy short sellers.

Second stake sale of flagship Adani Enterprises (ADEL.NS) 93% was subscribed on Tuesday, including the anchor investor segment, Indian stock market data showed. At least 90% subscription is required for share sale.

By Monday, the book-building process of the country’s largest share sale had received just 3% of the bids, amid concerns that the share sale could struggle due to a market slide in Adani’s shares in recent days.

The stake sale is crucial for Adani, not only because it is India’s biggest follow-on offer and will help reduce debt, but also because its success will be seen as a stamp of credibility by investors, at a time when the tycoon is facing one of its biggest business and reputational challenges in recent times.

The offer comes days after Adani’s public meeting with Hindenburg Research, which on January 24 flagged concerns about the use of tax havens and “significant debt” at the group. Shares of seven Adani-listed companies have retreated 85% as it called “sky-high valuations”.

This triggered a cumulative loss of $65 billion for Adani Group’s shares, which termed the report as baseless.

Adani’s shares received selling support as the flagship stock rose nearly 2.5% to trade at Rs 2,967, but the share price was below the group’s low of Rs 3,112.

“With only a few hours left for the deadline, the offering should be delivered. Companies seem to be subscribing to take advantage of the opportunity to buy in bulk outside the open market,” said founder Dipan Mehta. Director of Elixir Equities.

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Adani Group’s total gross debt rose 40% to 2.2 trillion rupees ($26.83 billion) in the fiscal year ended March 31, 2022. Adani said on Sunday – while responding to Hindenburg’s allegations – that the group had “constantly withdrawn” over the past decade. Hindenburg later said Adani’s response “confirmed our findings and ignored our key questions”.

Reuters Graphics

The group has repeatedly said in recent days that investors are on their side and that the share offering will continue amid growing concerns that it may not happen. Bankers at one point considered revising the issue price or extending the sale, Reuters reported.

Adani said the Hindenburg report was a “calculated attack” on the country and its institutions, while its CFO likened the market rout of its shares to a colonial-era massacre.

Demand from retail investors remained subdued, with only about 10% of the shares on offer for the segment being bid. On Tuesday, demand came mostly from foreign institutional investors and corporates who bid above Rs 1 million each, data showed.

Over the weekend and into Monday, Adani’s firm held extensive discussions with investment bankers and institutional investors to attract subscriptions, according to two sources with direct knowledge of the negotiations.

Abu Dhabi Joint International Holding Company (IHC.AD) It said it would invest $400 million in the launch.

VK Vijayakumar, Chief Investment Strategist, Geojith Financial Services, said, “A follow-on IPO is required to restore investor confidence.

The Hindenburg Report and its fallout have attracted world attention. Adani, who was third on the Forbes Rich List last week, is now the eighth richest man in the world.

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Adani Transmission (ADAI.NS) Adani Ports and SEZ rose 1.6% on Tuesday, after losing 38% since the Hindenburg report. (APSE.NS) 3.2% higher.

Adani Total Gas (ADAG.NS) Adani Power languished in its 10% lower price range (ADAN.NS) and Adani Wilmer (ADAW.NS) 5% each down.

Reuters Graphics

Global index publisher FTSE Russell said on Tuesday that it continues to monitor publicly available information on the group, particularly from Indian regulators.

Hindenburg said in its statement that Adani Group has reduced US-bonds and non-India trading derivatives. On Tuesday, US dollar-denominated bonds issued by Adani Ports and Special Economic Zone continued to fall for a second week.

($1 = 82.0025 INR)

M. Sriram and Chris Thomas report; Cinematography by Aditya Kalra and Muralikumar Anantharaman

Our Standards: Thomson Reuters Trust Principles.

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