In mid 2022, the Adani Group was troubled by reports of it being deeply overleveraged as a result of borrowing too much debt. The agency behind it, CreditSights revised its observation, but maintained that Adani’s leverage remains a concern. To address questions about its debt, Adani Enterprises decided to raise cash by selling shares through a follow-on public offer, but was hit by Hindenburg Research’s report accusing the group of corporate fraud.
FPO crucial amid stock market rout
The report triggered a sell-off, which caused stocks of Adani Group firms to fall more than 20 per cent, and while the FPO managed to salvage Adani Enterprise and Adani Ports, the others remained in the red. Amid concerns that the Adani Group had lost investor confidence, the FPO was fully subscribed, but while that may look like a success, there’s more to it.
Here’s the breakdown
While the qualified institutional buyers subscribed to 97 per cent of the 1.28 crore shares set aside for them, Non-Institutional Investors (NII) sent bids for three times the 96.16 lakh shares earmarked for them.
This means that 2.24 crore shares were kept for QIBs and NIIs, this leaves close to 2.31 crore shares for retail investors and Adani’s own employees.
But while employees only bid for 55 per cent of the stocks from their quota, while the retail investors in the open market only subscribed to 12 per cent of shares on sale for the.
Wealthy peers bailed out Adani?
This has happened despite a discount of Rs 64 per share, since Adani Enterprises’ stocks were trading at below Rs 3000 on the open market, which was way below the FPO price band of Rs 3,111 to Rs 3,276 per share.
About 16 per cent of the FPO was subscribed by Abu Dhabi’s International Holding Company, which had already invested Rs 7,700 crore in Adani Enterprises, as part of a Rs 15,400 crore infusion in the group in May 2022.
Apart from the existing investor, the NIIs include ultra high net worth players, which includes Ambanis of Reliance, Sunil Bharti Mittal of Airtel, and Sajjan Jindal, alongside Sudhir Mehta and Pankaj Patel, according to reports by Business Standard.
Common investors not impressed?
What this indicates is that while high income investors and those already invested in the Adani Group have subscribed to the FPO, it failed to attract a large number of common Indian share buyers in the open market. The end of the FPO on this note came after the Adani Group CFO likened Indians selling off its stocks to those in the Jallianwala Bagh massacre who fired at their own countrymen.
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