India’s Adani is facing the storm as investors rush to sell $2.5 billion worth of shares

MUMBAI (Reuters) – The sale of Gautam Adani’s $2.5 billion shares took place in full on Tuesday as investors poured money into his flagship company, despite a $65 billion loss in the Indian billionaire’s shares that resulted from the short seller’s report.

The fundraiser is critical to Adani, not only because it will help reduce his group’s debt, but also because it is seen by some as a measure of confidence at a time when the businessman faces one of his biggest business and reputation challenges.

A Hindenburg Research report last week alleged improper use of offshore tax havens and concerns about high debt, which Adani denied, but the subsequent crash in the market led to a dramatic and sudden drop in his fortunes as he fell to eighth place from third in the rankings of the Forbes list of the rich. .

India’s largest secondary share sale attracted participation from major investors including Maybank Securities and Abu Dhabi Investment Authority, as well as India’s HDFC Life Insurance and state-backed Life Insurance Corporation. (LIFI.NS).

But while 30% of the issue was fully subscribed last week, Book Building only had 3% in bids on Monday, amid concerns about a crash in Adani shares.

By Tuesday, the share sale was fully oversubscribed as foreign institutional investors and corporate funds poured in, though retail investors and Adani Ventures also participated. (ADEL.NS) Staffing remained low.

“The successful completion of the FPO (follow-on public offering) will be seen by investors as a welcome relief, as it means the company still has the support of institutional investors,” said Leonard Law, senior credit analyst at Lucror Analytics Singapore. Tuesday.

“The FPO will help extend Adani Enterprises’ public flotation (thereby partially addressing the issue around concentrated promoter contribution), as well as reduce the company’s leverage and improve investor sentiment,” Lu added.

The show closes days after Adani’s public confrontation with Hindenburg Research, which last week cited concerns about the use of tax havens and “significant debt” at the group. She added that shares in seven companies listed in “Adani” witnessed a decline of 85% due to what she called “high valuations.”

The Adani Group said it complies with all laws and disclosure requirements, called the report unfounded and added that it was considering taking action against the Hindenburg.

Support for the sale of Adani shares came even as the principal shares closed at Rs 2,973.9, up nearly 3% but below the lower end of the selling price range of Rs 3,112.

The total gross debt of the Adani Group in the fiscal year ending March 31, 2022 increased by 40% to 2.2 trillion rupees ($26.83 billion). On Sunday, responding to Hindenburg’s allegations, Adani said the group had “consistently let go” over the past decade.

Adani said the Hindenburg report was a “calculated attack” on India and its institutions, while its chief financial officer compared the market rout for its shares to a colonial-era massacre.

Hindenburg later said that “Adani’s response largely confirmed our findings and ignored our main questions”.

Retail and corporate demand

When asked about the Adani-Hindenburg saga, Chief Economic Adviser to India V.I. Anantha Nageswaran told reporters that “the corporate sector as a whole has cleared its financial debt and their balance sheets are doing well. So, what happens to a particular group of companies is a matter between the market. And the group of companies.”

Al-Adani had said repeatedly in recent days that investors are on his side and the shares will be offered. Reuters reported that bankers at some point considered adjusting the issue prices or extending the sale.

Most of the demand during the public book building process came from non-institutional investors who invested more than 1 million rupees each, and bids totaled five times the shares offered. The Qualified Institutional Buyers segment, which includes foreign investors, was 1.2 times oversubscribed.

But local financial institutions or banks, as well as local investment funds, did not submit any bids. Demand from retail investors and company employees remained muted, with bids for 12% and 55% of the shares offered.

“The Hindenburg report affected sentiment especially at the retail level. The purpose of the FPO was twofold – to raise funds to reduce debt and broaden the shareholder base… they were unable to broaden the base,” said Ambaresh Palega, an independent market analyst based in Mumbai.

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

The names of the investors are not yet available, but the Abu Dhabi International Holding conglomerate is (IHC.AD) It said late Monday it would invest $400 million.

Bring me back the transmission (ADAI.NS) It closed nearly 4% higher on Tuesday after losing 38% since the Hindenburg report, while the Adani Ports and Special Economic Zone (APSE.NS) jumped 2.6%.

Take me back to Total Gas (ADAG.NS) It closed down 10% at the price floor, while Adani Power closed (ADAN.NS) Willmar condemned me (ADAW.NS) They both fell by 5%.

Hindenburg said in its report that it downgraded US bonds and derivatives traded outside India for Adani Group. US dollar-denominated bonds issued by Adani Ports and Special Economic Zone, on Tuesday, continued their decline in the second week.

Reporting by M. Sriram, Chris Thomas, Aditya Kalra, Jishree Upadhyay, Shivangi Acharya, Anshuman Daga, Bengaluru Newsroom; Editing by Muralikumar Anantharaman and Alexander Smith

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