MUMBAI, Jan 31 (Reuters) – Gautam Adani’s pivotal $2.5 billion share sale reached full subscription on Tuesday as investors poured funds into his flagship despite a damning short seller report that had ravaged the Indian billionaire’s shares Adani Enterprises pumped.
The stock sale is crucial for Adani, not only because it will help reduce his group’s debt, but also because its success will be taken as a sign of investor confidence as it faces one of its biggest business and reputational challenges.
Although the 30% anchor stake in the issue was fully subscribed last week, the bookbuilding process of India’s largest secondary equity sale had just 3% bids on Monday amid concerns that the downturn in Adanis shares could cause difficulties.
But on Tuesday, the entire stock sale was fully subscribed as foreign institutional investors and companies pumped in funds, although participation from retail investors and Adani Enterprises (ADEL.NS) employees remained low.
“Investors would take the successful completion of the FPO (Follow-on Public Offering) as a welcome relief as it implies the company still has the backing of institutional investors,” said Leonard Law, senior credit analyst at Lucror Analytics Singapore, on Tuesday .
“The FPO would help increase Adani Enterprises’ IPO (partly addressing the issue of promoter concentration), as well as reduce leverage for the company and improve investor sentiment,” Law added.
The offer ends days after Adani’s public confrontation with Hindenburg Research, which last week raised concerns about the group’s use of tax havens and “significant indebtedness”. It added that shares of seven companies listed on the Adani Stock Exchange have an 85% downside potential due to so-called “sky high valuations”.
That resulted in cumulative losses of $65 billion for shares of Adani Group, which called the report baseless.
Support for Adani’s share sell came even as the flagship shares closed at Rs.2,973.9, up nearly 3% but below the lower end of the Rs.3,112 selling price range.
Adani Group’s total gross debt increased by 40% to Rs. 2.2 trillion (US$26.83 billion) for the year ended 31 March 2022. Adani said Sunday in response to Hindenburg’s allegations that the group had “consistently reduced debt” over the past decade.
Adani even said the Hindenburg report was a “calculated attack” on India and its institutions, while his chief financial officer compared his stock market plunge to a colonial-era massacre.
Hindenburg later said Adani’s answer “largely confirmed our findings and ignored our key questions”.
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Adani had repeatedly stated in the past few days that investors were by his side and would go through the share offer. Bankers had at one point considered tweaking the pricing of the issue or extending the sale, Reuters had reported.
Demand from retail investors resulted in offers worth only about 10% of the shares offered for this segment. Demand came mostly from overseas institutional investors as well as companies bidding more than Rs 1 million each, the data showed.
Over the weekend and into Monday, Adani’s firm held extensive talks 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 aftermath have attracted worldwide attention. Adani is now the eighth richest person in the world after taking third place on Forbes’ list of the rich last week.
Adani Transmission (ADAI.NS) closed nearly 4% higher on Tuesday after shedding 38% since the Hindenburg report, while Adani Ports and Special Economic Zone (APSE.NS) is up 2.6%.
Adani Total Gas (ADAG.NS) closed 10% lower at its lower price limit, while Adani Power (ADAN.NS) and Adani Wilmar (ADAW.NS) each lost 5%.
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Global index publisher FTSE Russell said Tuesday it continues to monitor publicly available information about the group, particularly from Indian regulators.
Hindenburg said in its report it had shorted US bonds and non-India-traded Adani Group derivatives. On Tuesday, US dollar-denominated bonds issued by Adani Ports and the Special Economic Zone continued their decline for a second week.
Reporting by M. Sriram, Chris Thomas, Aditya Kalra, Jayshree Upadhyay, Anshuman Daga and Bengaluru Newsroom; Edited by Muralikumar Anantharaman and Alexander Smith
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