The Adani group on Wednesday evening decided to call off its Rs20,000 crore follow-on public offer (FPO) of Adani Enterprises Ltd, citing the unprecedented situation and the current market volatility. It says it would refund money collected from investors for the FPO. Shares of all Adani group companies have been on a southern journey since the past week when US-based Hindenburg Research published a report claiming "the seven key listed companies of Adani group are 85%+ overvalued even if you ignore our investigation and take the companies' financials at face value."
In a regulatory filing, Gautam Adani, chairman of Adani group, says, "...the market has been unprecedented, and our stock price has fluctuated over the course of the day. Given these extraordinary circumstances, the company's board felt that going ahead with the issue will not be morally correct. The interest of the investors is paramount and hence to insulate them from any potential financial losses, the board has decided not to go ahead with the FPO."
On Tuesday, the FPO of Adani Enterprises was oversubscribed with help from non-institutional investors (NIIs) and qualified institutional buyers (QIBs). The price band was set at Rs3,112 - Rs3,276 per FPO equity share and a discount of Rs64 per share was being offered to retail individuals. However, with the segment barely subscribed 0.12 times, retail investors appear to have ignored the FPO.
"We are working with our book-running lead managers (BRLMs) to refund the proceeds received by us in escrow and to also release the amounts blocked in your bank accounts for subscription to this issue," Mr Adani says in the release.
Further, it says, "Our balance sheet is very healthy with strong cashflows and secure assets, and we have an impeccable track record of servicing our debt. This decision will not have any impact on our existing operations and future plans. We will continue to focus on long-term value creation and growth will be managed by internal accruals. Once the market stabilises, we will review our capital market strategy."
At 9.36am Thursday, Adani Enterprises was trading 9.80% down at Rs1,920 on the BSE, while the benchmark Sensex was flat at 59,702 points.
Meanwhile, according to a report from Forbes
, two companies accused by Hindenburg Research of assisting the Adani group in its alleged conspiracy of accounting fraud and stock market manipulation were underwriters in Adani Enterprises' Rs20,000 crore FPO.
It says, "Elara Capital (India) Pvt Ltd, a subsidiary of London-based investment firm Elara Capital, and Monarch Networth Capital, an Indian brokerage firm, were two of the ten underwriters disclosed by Adani Enterprises in its offer agreement for sale. Elara Capital's India Opportunities Fund, an offshore vehicle that holds US$3 billion worth of publicly traded stock in Adani companies (including Adani Enterprises), serves as one of Adani's stock parking entities to skirt Indian regulations, according to allegations from Hindenburg Research."
"Monarch Networth Capital, an Indian brokerage firm, has been partially owned by the privately held Adani Properties Pvt Ltd since 2016, according to Hindenburg's report. Albula, an offshore fund identified by Hindenburg as a proxy of Adani's, held a 10% ownership stake in Monarch in 2009, according to ownership records cited by Hindenburg," the Forbes
According to a Bloomberg report
, Credit Suisse has stopped accepting bonds of Adani's group of companies as collateral for margin loans to its private banking clients.
"The Swiss lender's private banking arm has assigned a zero lending value for notes sold by Adani Ports and Special Economic Zone, Adani Green Energy and Adani Electricity Mumbai Ltd, according to people familiar with the matter, who asked not to be identified discussing private information. It had previously offered a lending value of about 75% for the Adani Ports notes, one of the people said," the report says.
Last week, the Adani group threatened punitive action against Hindenburg Research, while the US-based research firm says it stand by its report and any action against it would be 'meritless'.
In a release, Jatin Jalundhwala, group head for legal at Adani, says, "We are deeply disturbed by this intentional and reckless attempt by a foreign entity to mislead the investor community and the general public, undermine the goodwill and reputation of the Adani group and its leaders, and sabotage the FPO (follow-on public offering) from Adani Enterprises. We are evaluating the relevant provisions under US and Indian laws for remedial and punitive action against Hindenburg Research."