Due to pressure over the Hindenburg report, Adani bonds reached distress levels, and FPO was withdrawn.
The business stated that it is collaborating with its Book Running Lead Managers (BRLMs) to release the funds held in investors’ bank accounts for subscription to this issue as well as to reimburse the money it received in escrow.
After American short seller Hindenburg Research accused the company of employing tax havens and raised debt concerns in a report, Adani Enterprises said on February 1 that it had cancelled its Follow-On Public Offering (FPO) and will refund money to its investors amid ongoing controversy.
Adani Enterprises stated in an exchange filing that the board of directors of the company decided today, February 1, 2023, not to move forward with the further public offer (FPO) of equity shares totaling up to Rs 20,000 crore with a face value of Rs 1 each on a partly paid-up basis, which was fully subscribed.
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 would like to thank all of the investors for their dedication to and support of our FPO. Yesterday, the subscription for the FPO was successfully closed. Your trust and confidence in the Company, its operations, and its management have been incredibly encouraging and humbling notwithstanding the recent volatility in the stock. In a press release, Adani expressed his gratitude.
Added him: “However, the market today has been unlike any other, and our stock price has changed throughout the day. The board of the Company determined that moving forward with the matter would not be morally right given these unique circumstances. The investors’ best interests are of utmost importance, hence the Board opted against moving forward with the FPO in order to protect them from any potential financial damages.”
The company is working with its Book Running Lead Managers (BRLMs) to release the funds blocked into investors’ bank accounts for subscription to this issue as well as to repay the proceeds it received in escrow.
Following news that Credit Suisse no longer accepts bonds from Adani firms as collateral for margin loans, Adani Enterprises experienced a nearly 26% decline, closing at Rs 2,180.20 per share on the BSE. Adani Ports, a different group stock, likewise saw a 20 percent lower circuit and finished each at $492.15. Ambuja Cements’ 16.56 percent slide to close at Rs 334.60 and ACC’s 5.96 percent drop to Rs 1,852 further exacerbated the group’s decline.
After the Adani group’s stock suffered a $92 billion drop, the firm pulled back on its record domestic public offering.
The company’s bonds fell to distressed levels in US trade.
Following a report by Hindenburg Research last week alleging stock manipulation and inappropriate use of offshore tax havens by the Adani Group, the shares of the group’s firms have continued to drop. The research company also expressed concern about the valuations of the seven listed Adani companies and their high debt levels.
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.
Gautam Adani further stated that the decision won’t affect the business’s ongoing operations in his statement.
“We have a solid track record of repaying our debt, and our balance sheet is highly robust with strong cashflows and safe assets. No changes will be made to our current operations or our future plans as a result of this choice. Growth will be controlled by internal accruals as we continue to concentrate on long-term value development.
We will reevaluate our capital market approach after the market stabilises. We have every faith that you will continue to support us. We appreciate your faith in us, Adani remarked.
According to Ben Silverman, head of research at VerityData, “it’s unusual for a secondary offering like this to be cancelled.” It doesn’t give me much confidence right now to pull an offering at the last minute.
Given the decline in share prices, the Adani family might need to pledge more shares, but according to our calculations, they could still maintain a healthy headroom with the fraction pledged at no more than 40%. Sharon Chen, a credit analyst at Bloomberg Intelligence, wrote in a note.