Indian billionaire Gautam Adani has succeeded with his $2.4bn equity sale by securing bids for more than 92 per cent of the shares on offer despite a short seller report targeting his industrial empire.
The equity sale was initially intended to widen the shareholder base of Adani Enterprises, of which Adani owns a roughly three-quarters stake. The stock has come under criticism for its low trading liquidity.
But after short seller Hindenburg Research released a report last week alleging Adani Group, the parent company of Adani Enterprises, had engaged in stock manipulation and accounting fraud, the success of the sale became a test of investor faith in the group.
For the share sale to be a success, it needed to place more than 90 per cent of the offer. As of 2:54pm in India, the follow-on share offer by Adani Enterprises had received bids for about 41mn shares of the total 45.5mn being sold to the public.
Another 18.3mn have been allocated to anchor investors, including London-listed Jupiter Asset Management, BNP Paribas, Société Générale and Goldman Sachs.
At least 90 per cent of the total shares on offer must be sold by the end of the day for the deal to close successfully. In India, the bulk of bids typically come near the end of an equity sale.
Shares in Adani Enterprises rose about 2.5 per cent on Tuesday to Rs2964 ($36.15). This was still short of the Rs3,112 price floor set by the company for the offering and down almost 15 per cent from the stock’s close on January 24 before Hindenburg released its report.
Hindenburg said that Adani Group, whose holdings span a swath of the Indian economy from ports to data centres, used offshore entities in tax havens to artificially inflate the share prices of its listed companies, allowing them to take on more debt and “putting the entire group on a precarious financial footing”. The report caused a nearly $70bn wipeout of Adani Group stocks.
Adani has rejected the allegations as baseless and threatened legal action against Hindenburg. His group published its own rebuttal on Sunday, calling Hindenburg an “unethical short seller” and the report “a calculated attack on India”.
The partial recovery in the shares of some Adani Group subsidiaries came after Abu Dhabi-based conglomerate International Holding Company said on Monday that it would invest $400mn into the share sale, representing about 16 per cent of the total offer. It is not yet clear how much of this stake the company has already taken.
Adani Enterprises bought full-page advertisements and public announcements about the share sale in several national Indian newspapers which ran on Tuesday.
Hindenburg’s allegations mark a rare challenge from the markets to Adani Group. Its 60-year-old founder and chair is India’s richest man and comes from Gujarat, the home state of Prime Minister Narendra Modi.
His companies have expanded rapidly, clinching infrastructure, energy, clean power, and other deals in recent years in tandem with India’s growing economy.
