Indian billionaire Gautam Adani pulled off a closely watched $2.5 billion equity sale for his flagship company, earning some reprieve after his empire was rocked by allegations of fraud 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.
While its 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.
Uptake from retail investors was notably weak, with a large portion of the offering taken up by institutions and existing shareholders including Abu Dhabi’s International Holding Co. Market values of Adani’s listed companies plunged 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 and threatened legal action against the firm.
The fully subscribed offering nevertheless 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.
“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.”
Still, individual investors bid for a little over 10% of the shares offered to them in the sale — undermining the group’s key goal of broadening the 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 Abu Dhabi’s International Holding Co., which said Monday it will invest about $400 million. The funding from IHC, which is controlled by a key member of the emirate’s royal family, will represent about 16% of the offering and follows an almost $2 billion investment in Adani’s companies last year.
“Now that Adani’s FPO is out of the way, investors’ focus may start shifting back to India growth story,” said Sumeet Rohra, a fund manager at Smartsun Capital Pte. in Singapore.
The 2029 dollar bond issued by Adani Ports & Special Economic Zone Ltd. surged 7 cents to 79.352 cents, according to Bloomberg-compiled data. Still, it’s well below the 90.5 cent level before the Hindenburg report was published.
Adani Green Energy Ltd.’s dollar bond maturing in Sept. 2024 was up 4 cents to 75.6 cents, the data showed.
–With assistance from Abhishek Vishnoi and Ishika Mookerjee.
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