Adani’s $2.5 billion stock offering backed by investors, despite attack from short sellers

MUMBAI, Jan 31 (Reuters) – Indian billionaire Gautam Adani’s $2.5 billion share sale edged closer to full subscription on Tuesday as investors pumped in after a tumultuous week for his group in during which its shares were ravaged by a scathing report on short sellers.

The secondary sale of shares of flagship Adani Enterprises (ADEL.NS) was 93% subscribed on Tuesday, including the share of core investors, according to data from the Indian stock market. The sale of shares required at least 90% subscription to be carried out.

On Monday, the book-building process of the nation’s biggest stock sale had received just 3% bids, amid swirling concerns that the stock sale could struggle due to a rout of Adani’s stock market in recent days.

The share sale is key for Adani, not only because it is India’s biggest follow-on offering and will help reduce debt, but also because its success will be seen as a boost to confidence. by investors at a time when the tycoon is facing one of his biggest business and reputational challenges in recent times.

The offer ends days after Adani’s public confrontation with Hindenburg Research, which on Jan. 24 raised concerns about the group’s use of tax havens and “substantial debt”. He added that shares of seven Adani-listed companies were down 85% due to what he called “exorbitant valuations”.

It has since caused $65 billion in cumulative losses for shares in the Adani Group, which called the report unsubstantiated.

Adani’s share selling support came even as shares of the flagship traded at 2,967 rupees, up almost 2.5% but below the lower end of the price range of sale of shares for 3,112 rupees.

“It looks like there are only a few hours left on the last day, but the supply should materialize. Institutions seem to be underwriting to capitalize on the opportunity to buy wholesale outside the open market,” said Dipan Mehta, founder. director of Elixir Equities.

Adani Group’s total gross debt in the fiscal year ended March 31, 2022 increased by 40% to 2.2 trillion rupees ($26.83 billion). Adani said on Sunday – while responding to Hindenburg’s allegations – that over the past decade the group had “constantly deleveraged”. Hindenburg later said that Adani’s “response largely confirmed our conclusions and ignored our key questions”.

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The group had in recent days repeatedly said investors stood by it and the share offering would go through, amid growing concerns that it might not happen. Bankers had at one point considered changing the issue’s price or extending the sale, Reuters reported.

Adani even said the Hindenburg report was a “calculated attack” on the country and its institutions, while his chief financial officer compared the rout of his actions to a colonial-era massacre.

Demand from retail investors remained subdued, garnering bids for only around 10% of the stocks on offer for this segment. Demand on Tuesday came mainly from overseas institutional investors, as well as companies that offered more than one million rupees each, according to the data.

Over the weekend and into Monday, Adani’s company had extensive discussions with investment bankers and institutional investors to attract subscriptions, according to two sources with direct knowledge of the talks.

Abu Dhabi International Holding Company Conglomerate (IHC.AD) said he would invest $400 million in the show.

“The follow-on public offering must be done to restore investor confidence,” said VK Vijayakumar, chief investment strategist at Geojit Financial Services.

The Hindenburg Report and its fallout have captured global attention. Adani is now the eighth richest person in the world, down from third on Forbes’ rich list last week.

Adani Transmission (ADAI.NS) rose 1.6% on Tuesday, after losing 38% since the Hindenburg report, while Adani ports and the special economic zone (APSE.NS) climbed 3.2%.

Adani Total Gas (ADAG.NS) languishes at its 10% lower price limit, while Adani Power (ADAN.NS) and Adani Wilmar (ADAW.NS) were down 5% each.

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Global index publisher FTSE Russell said on Tuesday it continued to monitor publicly available information about the group, particularly from Indian regulators.

Hindenburg said in his report that he had shorted US bonds and non-Indian derivatives of the Adani Group. On Tuesday, US dollar-denominated bonds issued by Adani ports and the special economic zone continued their slide in a second week.

($1 = 82.0025 Indian rupees)

Reporting by Mr. Sriram and Chris Thomas; Editing by Aditya Kalra and Muralikumar Anantharaman

Our standards: The Thomson Reuters Trust Principles.

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