As Adani's problems escalate, group's flagship drops by 28%, scraps its FPO
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Mumbai: The Adani Group companies were once more in a virtual free fall on Wednesday, a day when the markets enthusiastically welcomed the Budget. The group late at night said it had decided to cancel the Rs 20,000 crore follow-on public offer (FPO) and refund the money to investors since its flagship Adani Enterprises Limited fell 28.4%.
This occurred the day after its FPO barely succeeded with the help of non-institutional investors, such as HNIs and the family offices of entrepreneurs. And hours after Swiss lender Credit Suisse Group AG, according to a Bloomberg report, had stopped“accepting bonds of Adani Group companies as collateral for margin loans to its private banking clients.”
Gautam Adani, the chairman of the Adani Group, dropped from No. 3 on the Forbes billionaire list to No. 15 at the end of the day with a personal net worth of $74.7 billion, down $14 billion from the previous day. With Adani Ports plunging 19.7%, all stocks in the Adani Group were lower.
In its statement, AEL said: “Given the unprecedented situation and the current market volatility, the company aims to protect the interest of its investing community by returning the FPO proceeds and withdrawing the completed transaction.”
It quoted its chairman Gautam Adani: “Today 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 the final day of the issue (January 31), the FPO had an oversubscription of 112%. “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,” Adani said.
After a US-based Hindenburg Research investigation accused the group of "brazen stock manipulation and accounting fraud," Adani group companies saw their market capitalization drop by nearly Rs 7 lakh crore. The decline in Adani stock also hurt bank stocks. Markets are concerned about the potential for further declines in Adani shares, and investors who contributed to the FPO have reportedly put pressure on the issue's removal.
In the FPO, FIIs applied for 1.24 crore shares worth Rs 4,127 crore, while corporations and high net worth individuals bid for 1.66 crore shares worth Rs 5,438 crore. International Holding Company, located in Abu Dhabi, made a $400 million investment on Monday, or roughly Rs 3,300 crore. 33 investors, including Maybank Securities Pte and the Abu Dhabi Investment Authority, submitted bids totaling Rs 5,984 crore in the category of anchor investors.
Adani asserted that the group has a flawless track record of repaying our debt and that its balance sheet is healthy with strong cash flows and secure assets. “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 stabilizes, we will review our capital market strategy. We are very confident that we will continue to get your support,” Adani said.
