Adani weathers storm as investors rally behind $2.5 billion share sale

MUMBAI, Jan 31 (Reuters) – Gautam Adani’s decisive $2.5 billion share sale hit a record high on Tuesday as investors poured into his flagship company Adani Enterprises despite a scathing report by short sellers that hit shares of the Indian billionaire.

Selling shares is critical to Adaninot only because it will help reduce his group’s debt, but also because his success will be seen as a sign of investor confidence as he faces one of his biggest business and reputational challenges.

Although the bulk of the 30% issue was fully subscribed last week, the book-building process of India’s largest secondary share sale had just 3% on offer on Monday, amid fears it could be hampered by the collapse of Adani shares.

But on Tuesday, overall equity selling was completely booked as foreign institutional investors and corporates poured in funds, despite participation from retail investors and Adani Enterprises (ADEL.NS) officials remained low.

“Investors would see the successful completion of the FPO (subsequent public offering) as a welcome relief as it suggests the company still has the backing of institutional investors,” Leonard Low, senior credit analyst at Lucror Analytics Singapore, said on Tuesday .

“The FPO would help expand the IPO of Adani Enterprises (thereby partially addressing the problem of concentrated promoter shareholding) as well as reduce leverage for the company and improve investor sentiment,” added Lo.

The offer closes days after Adani’s public meeting with Hindenburg Research, which last week noted concerns about the use of tax havens and “significant debt” at the group. He added that shares in seven Adani-listed companies were down 85% on what he called “sky-high valuations”.

That triggered cumulative losses of $65 billion for shares in the Adani group, which called the report baseless.

The support for selling in Adani shares came even as the flagship’s stock closed at Rs 2,973.9, up nearly 3% but below the lower end of the selling price range of Rs 3,112.

Adani Group’s total gross debt in the financial year ended March 31, 2022, rose 40% to 2.2 trillion rupees ($26.83 billion). Adani said on Sunday at response to Hindenburg’s accusations that over the past decade the group has been “in steady decline.”

Adani even said the Hindenburg report was a “measured attack” on India and its institutions, while its CFO compared its stock market crash to colonial era massacre.

Hindenburg later said that “Adani’s response largely confirms our findings and ignores our key questions.”

Reuters Graphics

Adani has repeatedly said in recent days that investors are standing by it and the share offering will go ahead. Bankers at one point considered changing the price of the issue or extending the sale, Reuters reported.

Demand from retail investors only garnered bids worth around 10% of the shares on offer for this segment. Demand came mostly from foreign institutional investors as well as corporates bidding above 1 million rupees each, the 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 talks.

Abu Dhabi Conglomerate International Holding Company (IHC.AD) said it would invest $400 million in the issue.

The Hindenburg Report and its consequences attracted worldwide attention. Adani is now the world’s eighth-richest person, down from third place on Forbes’ list last week.

Adani transmission (ADAI.NS) closed nearly 4 percent higher on Tuesday after losing 38 percent following the Hindenburg report, while Adani Ports and Special Economic Zone (APSE.NS) rose 2.6%.

Adani Total Gas (ADAG.NS) closed up 10% at its lower price limit while Adani Power (ADAN.NS) and Adani Wilmar (ADAW.NS) are down 5% each.

Reuters Graphics

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

Hindenburg said in his report that he had shorted US bonds and non-Indian traded derivatives of the Adani Group. On Tuesday, bonds denominated in US dollars issued by Adani Ports and Special Economic Zone continued their fall in the second week.

Reporting by M. Sriram, Chris Thomas, Aditya Kalra, Jayshree Upadhyay, Anshuman Daga and Bengaluru editorial; Editing by Muralikumar Anantharaman and Alexander Smith

Our standards: Thomson Reuters Trust Principles.

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