India's Adani rides out storm as investors rally to $2.5 billion share
sale
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[January 31, 2023]
By Chris Thomas, Aditya Kalra and Sriram M
MUMBAI (Reuters) -Gautam Adani's crucial $2.5 billion share sale was
fully subscribed on Tuesday as investors pumped funds into his flagship
firm, despite a $65 billion rout in the Indian billionaire's stocks
sparked by a short-seller's report.
The fundraising is critical for Adani, not just because it will help cut
his group's debt, but also because it is being seen by some as a gauge
of confidence at a time when the tycoon faces one of his biggest
business and reputational challenges.
Hindenburg Research's report last week alleged improper use of offshore
tax havens and concerns about high debt, which Adani denied, but the
subsequent market meltdown has led to a dramatic and sudden fall in his
fortunes as he slipped to eighth from third in Forbes rich list
rankings.
India's largest ever 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 Corporation.
But while the 30% anchor portion of the issue had been subscribed fully
last week, the book building had only 3% in bids on Monday, amid
concerns over the rout in Adani's stocks.
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By Tuesday the overall share sale was fully subscribed as foreign
institutional investors and corporate funds flooded in, 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, as it implies that the company
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 issue over the promoters’ concentrated
shareholding), as well as reduce leverage for the company and improve
investor sentiment," Law added.
The offer closes days after Adani's public face-off with Hindenburg
Research, which last week flagged concerns about the use of tax havens
and "substantial debt" at the group. It added that shares in seven Adani
listed companies have an 85% downside due to what it called "sky-high
valuations".
That Adani group has said it complies with all laws and disclosure
requirements, calling the report baseless and adding it is considering
taking action against Hindenburg.
Support for Adani's share sale came even 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 3,112 rupees.
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 in response to Hindenburg's allegations that over the past decade
the group has “consistently de-levered”.
Adani 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."
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![](../images/013123PIX/busine38.jpg)
Indian billionaire Gautam Adani speaks
during an interview with Reuters at his office in the western Indian
city of Ahmedabad April 2, 2014. Picture taken April 2, 2014.
REUTERS/Amit Dave/File Photo
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RETAIL, CORPORATE DEMAND
Asked about the Adani-Hindenburg saga, India's chief economic
adviser V. Anantha Nageswaran told reporters the "corporate sector
as a whole has deleveraged and their balance sheets are healthy. So,
what happens to one particular corporate group, is a matter between
the market and the corporate group."
Adani had in recent days repeatedly said investors were standing by
its side and the share offering would go through. Bankers at one
point had considered tweaking the pricing of the issue, or extending
the sale, Reuters had reported.
Most of the demand during the public book building process came from
non-institutional investors who invested more than 1 million rupees
each, with bids totalling five times the shares on offer. The
portion for qualified institutional buyers, which includes foreign
investors, was 1.2 times subscribed.
But domestic financial institutions or banks, as well as domestic
mutual funds, made no bids. And demand from retail investors and
company employees remained muted, garnering bids of 12% and 55% of
shares on offer.
"The Hindenburg report has taken a toll on the sentiment especially
at the retail level. The purpose of the FPO was two fold – to raise
funds to reduce the debt and to broadbase the shareholding ... they
haven’t been able to broadbase the shareholding," Ambareesh Baliga,
a Mumbai-based independent market analyst, said.
Adani's firm held extensive discussions over the weekend and through
Monday with investment bankers and institutional investors to
attract subscriptions, according to two sources with direct
knowledge of the talks.
The names of investors is not yet available, but Abu Dhabi
conglomerate International Holding Company said late on Monday that
it will invest $400 million.
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Adani Transmission closed nearly 4% higher on Tuesday after losing
38% since the Hindenburg report, while Adani Ports and Special
Economic Zone climbed 2.6%.
Adani Total Gas closed down 10% at its lower price limit, while
Adani Power and Adani Wilmar were down 5% each.
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 into a second week.
(Reporting by M. Sriram, Chris Thomas, Aditya Kalra, Jayshree
Upadhyay, Shivangi Acharya, Anshuman Daga and Bengaluru newsroom;
Editing by Muralikumar Anantharaman and Alexander Smith)
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