Gautam Adani’s crucial $2.5 billion share sale achieved a full subscription on Tuesday as investors pumped funds into his flagship Adani Enterprises, despite a scathing short-seller’s report which had pummelled the Indian billionaire’s stocks.
The share sale is critical for Adani, not simply because it’ll help cut his group’s debt, but additionally because its success will probably be seen as a mark of investor confidence as he faces one among his biggest business and reputational challenges.
Although the 30% anchor portion of the difficulty had been subscribed fully last week, the book constructing means of India’s largest secondary share sale had only 3% in bids on Monday, amid concerns it could struggle on account of the rout in Adani’s stocks.
But on Tuesday, the general share sale was fully subscribed as foreign institutional investors and corporates pumped in funds, although participation by retail investors and Adani Enterprises employees remained low.
“Investors would view the successful completion of the FPO (follow-on public offering) as a welcome relief, because it implies that the corporate still has the support of institutional investors,” Leonard Law, Senior Credit Analyst at Lucror Analytics Singapore, said on Tuesday.
“The FPO would help to enlarge Adani Enterprises’ public float (thereby partly addressing the difficulty over the promoters’ concentrated shareholding), in addition to reduce leverage for the corporate and improve investor sentiment,” Law added.
The offer closes days after Adani’s public face-off with Hindenburg Research, which last week flagged concerns concerning the use of tax havens and “substantial debt” on the group. It added that shares in seven Adani listed firms have an 85% downside on account of what it called “sky-high valuations”.
That sparked $65 billion in cumulative losses for stocks of the Adani group, which called the report baseless.
The support for Adani’s share sale got here at the same time as the flagship’s shares closed at 2,973.9 rupees, up nearly 3% but below the lower end of the sale price band of three,112 rupees.
Adani Group’s total gross debt within the financial 12 months ended March 31, 2022, rose 40% to 2.2 trillion rupees ($26.83 billion). Adani said on Sunday in response to Hindenburg’s allegations that over the past decade the group has “consistently de-levered”.
Adani even said the Hindenburg report was a “calculated attack” on India and its institutions while its CFO compared the market rout of its stocks to a colonial-era massacre.
Hindenburg later said Adani’s “response largely confirmed our findings and ignored our key questions.”
Adani had in recent days repeatedly said investors were standing by its side and the share offering would undergo. Bankers at one point had considered tweaking the pricing of the difficulty, or extending the sale, Reuters had reported.
Demand from retail investors garnered bids only value around 10% of the shares on offer for that segment. Demand mostly got here from foreign institutional investors, in addition to corporates who bid in excess of 1 million rupees each, data showed.
Over the weekend and thru Monday, Adani’s firm held extensive discussions with investment bankers and institutional investors to draw subscriptions, based on two sources with direct knowledge of the talks.
Abu Dhabi conglomerate International Holding Company said it’ll invest $400 million in the difficulty.
The Hindenburg report and its fallout have drawn global attention. Adani is now the world’s eighth richest person, down from third rating on Forbes’ wealthy list last week.
Adani Transmission closed nearly 4% higher on Tuesday after losing 38% for the reason that Hindenburg report, while Adani Ports and Special Economic Zone climbed 2.6%.
Adani Total Gas closed down 10% at its lower cost limit, while Adani Power and Adani Wilmar were down 5% each.
Global index publisher FTSE Russell said on Tuesday it continues to watch publicly available information on the group, specifically from the Indian regulatory authorities.
Hindenburg said in its report it had shorted U.S.-bonds and non-India traded derivatives of the Adani Group. On Tuesday, U.S. dollar-denominated bonds issued by Adani Ports and Special Economic Zone continued their fall right into a second week.
