Mumbai: The record $2.5 billion share sale by Gautam Adani's flagship company 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 sale in the follow-on offering by Adani Enterprises Ltd. shortly before the close of the equity market in Mumbai on Tuesday.
The stakes were high for Adani, who has already suffered one of the world's biggest-ever declines in personal wealth. A successful deal would show he still has the ability to attract investors with bold expansion plans in industries ranging from green energy to ports and e-commerce. Failure would be a major blow to the tycoon's prestige and heighten concerns about the conglomerate's debt load.
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.
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.
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.
The follow-on public offering (FPO) is critical for Adani, not just because it will help cut the group's debt, but because its success will be seen as a mark of investor confidence as he faces one of his biggest business and reputational challenges of recent times.
SAURABH JAIN, ASSISTANT VICE-PRESIDENT, RESEARCH, SMC GLOBAL SECURITIES, NEW DELHI
"With the issue getting subscribed, I feel that it only shows that investors repose their faith and confidence in the Adani Group and that they do believe in its growth story. With the money coming in, the company will continue to be on a growth path, with the concerns left behind."
ARUN KEJRIWAL, FOUNDER OF KEJRIWAL RESEARCH AND INVESTMENT SERVICES
"The subscription happening within the three-day period, in the backdrop of Hindenburg's report, is quite noteworthy. The only tinge of disappointment is that retail subscription did not come through. That was their focus area considering the fact that there was a difference between the market price and the floor price of the FPO. It seems that retail investors did not consider the fact that there is more to rates than just the price."
LEONARD LAW, SENIOR CREDIT ANALYST, LUCROR ANALYTICS, SINGAPORE
"Investors would view the successful completion of the FPO as a welcome relief as it implies that the company still has the support of institutional investors. The FPO would help to enlarge Adani Enterprises' public float (thereby partly addressing the issue over the promoters' concentrated shareholding), as well as reduce leverage for the company and improve investor sentiment for the wider group.
"That said, it would be helpful to know the identities of the subscribers, given concerns over investments by offshore shell companies."
RUCHIT JAIN, LEAD RESEARCH ANALYST AT 5PAISA.COM
"It seems good that the fear which was overdone is finally settled. This should bring confidence back in the Adani group stocks and broader markets too."
DEEPAK JASANI, HEAD OF RETAIL RESEARCH AT HDFC SECURITIES LTD
"One concern of the market seems to be out of the way now. They have been able to convince high-net-worth individuals and deep-pocketed people to take exposure."
SUMEET ROHRA, A FUND MANAGER AT SMARTSUN CAPITAL PTE. IN SINGAPORE
"Now that Adani's FPO is out of the way, investors' focus may start shifting back to India growth story."