The record $2.5 billion share sale by Gautam Adani’s flagship firm was fully subscribed on the final day, offering Asia’s richest man a reprieve after his empire was rocked by allegations of fraud by short seller Hindenburg Research.
(Bloomberg) — The record $2.5 billion share sale by Gautam Adani’s flagship firm was fully subscribed on the final day, offering Asia’s richest man a reprieve after his empire was rocked by allegations of fraud by short seller Hindenburg Research.
Investors had placed orders for about 100% of the total shares on offer by Adani Enterprises Ltd. — India’s largest follow-on share sale, exchange data showed shortly before the close of the equity market in Mumbai on Tuesday. The surge in demand came after a tepid response in the first two days since the offer opened for retail investors and other categories on Jan. 27.
The stakes were high for Adani, who has already suffered one of the world’s biggest-ever declines in personal wealth after Hindenburg last week alleged his conglomerate used a web of companies in tax havens to inflate revenue and stock prices even as debt piled up. A successful deal signals he still has the ability to attract investors with bold expansion plans in industries ranging from green energy to ports and e-commerce.
“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.”
While the last-minute surge in demand is a victory for Adani after Hindenburg’s report put the offering in doubt, it’s unlikely to fully dispel investor concerns about the conglomerate’s corporate governance.
Further, 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.
The fully subscribed offering removes one overhang for India’s $3.2 trillion stock market, which just dropped out of the world’s five biggest by value amid the Adani rout. The benchmark S&P BSE Sensex has eked out gains over the past two days, after tumbling on fallout from the Adani allegations last week.
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“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.
–With assistance from Abhishek Vishnoi and Ishika Mookerjee.
(Updates with details throughout.)
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