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Adani Withdraws Fully Subscribed FPO; Continues To Face Pressure Over Hindenburg Report

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Adani Enterprises said on February 1 that it had canceled its Follow-On Public Offering (FPO) and will refund money to its investors. The move was taken in the midst of ongoing controversy after American short seller Hindenburg Research accused the firm of employing tax havens and raised debt concerns in a report.

“The Board of Directors of the Company at its meeting held today i.e. February 1, 2023 has decided, in the interest of its subscribers, not to proceed with the further public offer (FPO) of equity shares aggregating up to Rs 20,000 crore ($2.44 Billion) of face value Rs 1 ($0.012) each on partly paid-up basis, which was fully subscribed,” Adani Enterprises said in an exchange filing.

The decision was made, according to Gautam Adani, Chairman of Adani Enterprises, in the midst of the swings that the group’s equities experienced during the day’s trading.

“The Board takes this opportunity to thank all the investors for your support and commitment to our FPO. The subscription for the FPO closed successfully yesterday. Despite the volatility in the stock over the last week, your faith and belief in the Company, its business and its management has been extremely reassuring and humbling. Thank you,” Adani said in a press statement.

“However, 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,” he added.

Adani’s loss of shares

In response to news that Credit Suisse no longer accepts Adani firms’ bonds as collateral for margin loans, Adani Enterprises experienced a nearly 26 percent decline, closing at Rs 2,180.20 ($26.61) per share on the BSE. Adani Ports, a different group stock, too experienced a 20% decline in price and closed at Rs 492.15 ($6.01) per share. Ambuja Cements’ 16.56 percent drop to close at Rs 334.60 ($4.08) and ACC’s 5.96 percent drop to close at Rs 1,852 ($22.61) contributed to the group’s additional decline.

The business pulled back its record domestic stock offering after the Adani group’s stock price crashed by $92 billion.

A budget proposal to limit tax deductions for insurance gains caused Indian markets to open lower on Thursday. Adani Group shares continued to decline as well.

After the group chose to cancel the $2.5 billion follow-on public offering, which had received a lot of interest, the price of Adani group shares continued to fall.

The drop in the shares of Adani Group companies is reportedly being investigated, as is the possibility of violations in the secondary share sale of Adani Enterprises.

The two biggest losers on the Nifty 50, Adani Enterprises and Adani Port, both dropped by 10%.

After the Indian government suggested a tax on the entire returns at maturity of life insurance plans issued on or after April 1, 2023, if the aggregate premium is more than 500,000 rupees ($6103.53) per year, high weighted financials fell by over 2%.

Following Wednesday’s stock losses, Gautam Adani, the chairman of Adani Group, dropped to position 10 on Forbes’ list of the world’s richest people, with an estimated $84.1 billion, only behind rival Mukesh Ambani, who has an estimated $84.4 billion. Adani had been ranked third before the Hindenburg study.

According to Forbes, Adani had a net worth of $127 billion as of last week, placing him third among the world’s richest people behind Bernard Arnault and Elon Musk. He had slid to No. 15 by Wednesday.

In US trade, the company’s bonds fell to distressed levels.

Hindenburg report

A report by Hindenburg Research last week alleged stock manipulation, excessive level of debt and inappropriate use of offshore tax havens by the Adani Group. The research company also expressed concern about the valuations of the seven listed Adani companies and their high debt levels.

Hindenburg Research
Hindenburg Research

The US-based short seller Hindenburg’s attack on Tuesday rallied investors behind the $2.5 billion share offering of flagship company, Adani Enterprises.

The Adani group is not new to controversies. Recently, the group had sued the state government and fishermen leaders of Kerala in India after many fishermen protested against the group’s construction of a $900-million port. The group has also been amidst controversy over their Carmichael coal mine project in Queensland as environmental activists have been protesting over carbon emissions and damage to the Great Barrier Reef.

Adani hits back at the report

The charges have been refuted by Adani Group, which claims that the short-claim seller’s of stock manipulation is unfounded and reflects a lack of legal knowledge. It said that it has always provided the relevant regulatory disclosures.

Due to a strong push from HNI investors on the final bidding day, the FPO, which ultimately received 112 percent subscription, performed middling with retail investors.

The Adani group said that the report was a “calculated attack” against India and its institutions. A senior executive compared the stock market’s decline to a massacre that occurred during colonial times, stating that investors were acting like Indian soldiers who shot at fellow residents on the orders of British authorities.

Adani himself seems unconcerned with the whole Hindenburg fiasco. On 31st of January, he arrived in Israel to formally take over Israel’s second largest port, Haifa port, which he had already acquired in collaboration with a local business. At the occasion, which Israeli Prime Minister Benjamin Netanyahu also attended, he pledged additional investments in Israel.

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