Adani Enterprises FPO fully subscribed amid row with Hindenburg; NII supports, but retail investors stay away

Uptake from retail investors was notably weak, with a large portion of the offering taken up by institutions and existing shareholders including Abu Dhabi’s International Holding Co. Market values of Adani’s listed companies plunged after Hindenburg’s allegations. Adani has denied the short seller’s allegations and threatened legal action against the US-based firm.

Out of the 4,55,06,791 fresh shares on offer under the follow-on public offering (FPO), bids were received for 5,08,68,352 shares or 112% by 5:30 pm, according to data from stock exchanges, led by strong demand from Non-institutional investors (NIIs) and Qualified Institutional Buyers (QIBs).

NIIs put in bids for over three times the 96.16 lakh shares reserved for them. Around 1.28 crore shares reserved for qualified institutional buyers, or QIBs, was almost fully subscribed, according to the data.

The employee quota attracted 55 per cent bids, while retail investors bid for only 12 per cent of their category, despite additional discounts, impeding Adani’s plans to expand his shareholder base and invite “the average, normal Indian mom and dad as shareholders”.

Why the FPO is critical for Adani?

The FPO is critical for Asia’s richest man, 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.

A follow-on public offering (FPO) is the issuance of shares to investors by a company listed on a stock exchange after its initial public offerings.

There were concerns that the FPO may not receive a strong response from investors amid the Hindenburg Research report, which claimed the Adani Group of having weak business fundamentals among others.

Among the most notable buyers is Abu Dhabi’s International Holding Co, which said it will invest about $400 million. The funding from IHC, which is controlled by a key member of the emirate’s royal family, will represent about 16% of the offering and follows an almost $2 billion investment in Adani’s companies last year.

“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,” Leonard Law, senior credit analyst at Singapore’s Lucror Analytics told Reuters.

Vinit Bolinjkar, Head of research at Mumbai’s Ventura Securities said, “The fact that the FPO has got fully subscribed reinforces the faith of institutional buyers. We believe that the successful completion of the FPO means that retail participation will return once the sanity prevails around the volatility in the stock.

“The FPO is a step in the right direction, given the fact that interest rates are expected to move up and infusing equity into the business will help fund part of the growth as well as repay some part of the debt which has been the equity stroke capital raising plans of the company.”

On Tuesday, shares in flagship Adani Enterprises closed 3.35 per cent higher but remained well below the ₹3,112-3,276 price range set for the FPO, making them cheaper to buy on the open market.

Adani Transmission, Adani Green Energy and Adani Ports settled 3.73, 3.06 and 2.67% higher respectively.

But Adani Total Gas saw another day of dramatic falls with trading halted for another session after diving 10 per cent in the morning.

60-year-old Adani was the world’s third-richest person last week but has now slipped to eighth place on Forbes’ real-time global rich list.