Adani Group called off the Rs 20,000 crore follow-on public offering (FPO) of its flagship firm on Wednesday, just a day after it was fully subscribed. It came as a surprise to the stock market and the investor community as such moves are rarely seen.
The Gautam Adani-owned conglomerate came out with a statement, saying that its board decided not to proceed further with the public offer (FPO) in the interest of its subscribers.
But why was the fully-subscribed FPO called off?
Explaining why a decision was taken to call off the share sale, the Adani Group cited the unprecedented situation and ongoing market volatility, adding that it “aims to protect the interest of its investing community by returning the FPO proceeds”.
Gautam Adani, Chairman, Adani Enterprises Ltd said, “The subscription for the FPO closed successfully yesterday. 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,” Adani added.
The billionaire, who has now dropped to 16th place on the Forbes Rich List, highlighted the same points in a video statement released today.
“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.
Adani Enterprises FPO withdrawn after shares plunge
Shares of Adani Enterprises plunged sharply on Wednesday, nosediving over 30 per cent in early trade. It also took down other listed companies that fell sharply. However, Adani Group stocks have been falling sharply since last week after a report was released by a US short seller, Hindenburg Research.
In its report, the short seller accused Adani Group of stock manipulation, improper use of tax havens and laundering. It also raised concerns about the group’s mounting debt.
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While Adani Group dismissed the report in multiple statements and even released a 413-page report in response to Hindenburg, the conglomerate’s stocks have faced carnage on the stock market, resulting in a cumulative market loss of $100 billion.
The Adani Enterprises FPO, which opened for subscription on January 27 and closed on January 31, was also hurt by the Hindenburg Report that was released on January 24.
The Adani Enterprises FPO, though fully subscribed, received little participation from retail investors as well, and most of the participation came from qualified institutional buyers and anchor investors.
Adani Group remains under pressure after Hindenburg report
Following the recent events, Adani Group is reportedly facing increased scrutiny over the Hindenburg report and the recent FPO.
The Securities and Exchange Board of India (Sebi) is looking into several allegations made by the US short seller, besides any potential irregularities in the Adani Enterprises FPO.
The Reserve Bank of India (RBI) also seems to be monitoring the group as it has asked Indian banks to provide details of their exposure to Adani Group companies.
Foreign brokerage CLSA estimates that Indian banks were exposed to about 40 per cent of the Rs 2 lakh crore of Adani Group’s debt in the fiscal year to March 2022.