Mumbai January 31 2023: Gautam Adani pulled off a closely watched $2.5 billion equity sale for his flagship company, largely thanks to existing shareholders, earning the Indian billionaire some reprieve after his empire was rocked by fraud allegations by short seller Hindenburg Research.
The offering by Adani Enterprises Ltd. was India’s largest follow-on share sale, and was fully subscribed on the final day, aided by a last- minute surge in demand from institutional investors. Interest from retail investors — who Adani was hoping to attract — was notably weak.
While the share sale’s completion is a victory for Adani after Hindenburg’s allegations put the offering in doubt, that’s unlikely to fully dispel investor concerns about the conglomerate’s corporate governance.
Apart from existing Adani shareholder — Abu Dhabi’s International Holding Co., which accounted for 16% of the purchases in the offering, anchor investors like Life Insurance Corp. of India and an arm of Goldman Sachs Group Inc. also ploughed money in.
Market values of Adani’s listed companies have plunged in recent days after Hindenburg alleged the conglomerate used a web of companies in tax havens to inflate revenue and stock prices. Adani has denied the short seller’s allegations.
“One concern of the market seems to be out of the way now,” said Deepak Jasani, head of retail research at HDFC Securities Ltd. “They have been able to convince high-net-worth individuals and deep-pocketed people to take exposure.”
The fully subscribed offering removes one overhang for India’s $3.2 trillion stock market, which recently dropped out of the world’s five biggest by value. The benchmark S&P BSE Sensex has eked out gains over the past two days after tumbling on the Adani allegations last week.
A team of more than 60 people at the Adani Group worked on the share sale, with some asked to regularly brief global and domestic investors to allay concerns raised by the short-seller’s report, according to a person familiar with the matter.
On Saturday, the group had major roadshows with regional investors in Gujarat to convince them about the stock’s potential, another person said. Several high-net-worth individuals, including in the state where Adani hails from, offered help to the Adani Group, that person said. A representative for the Adani Group didn’t comment.
However, the weak uptake from individual investors — they bid for a little over 10% of the shares offered to them — undermines the group’s key goal of broadening its investor base. Adani Group Chief Financial Officer Jugeshinder Singh had said in November that after tapping strategic investors in recent years, the conglomerate was looking for a wider investor base that doesn’t mind a company investing in long-term projects that can take time to show returns.
The order books for institutional and retail investors opened within days of US short seller Hindenburg’s scathing report. The attack led to a massive selloff in the shares of the Adani Group, eroding more than $69 billion in combined market value of 10 companies, and sending the flagship’s stock below the offer price of the sale.
A failure to meet the fundraising goal would have been a major blow to Adani’s prestige and would have heightened concerns about the conglomerate’s debt load.
Among the most notable buyers is International Holding Co., which said Monday it will invest about $400 million. The funding from IHC, which is controlled by a key member of Abu Dhabi’s royal family, follows an almost $2 billion investment in Adani’s companies last year.
“Our interest in Adani Group is driven by our confidence and belief in the fundamentals of Adani Enterprises,” IHC’s Chief Executive Officer Syed Basar Shueb said in a statement. “We see a strong potential for growth from a long-term perspective and added value to our shareholders.”
