Will Hindenburg Research report impact Adani Enterprises FPO?

After heavy beating in the Adani Group stocks, the impact seems visible on Adani Enterprises FPO (Follow-on Public Offer) that has opened today. By 01:18 PM on day one of bidding, the follow-on issue has been subscribed 0.01 times only whereas its employee portion has been subscribed 0.03 time.

According to stock market experts, Hindenburg Research report may impact subscription of Adani Enterprises FPO but as soon as the fundamentals of the stock are intact, strong bounce back in the scrip can’t be denied. They said that the Hindenburg Research report and its fallout needs to be examined by the market regulator SEBI as the US-based research firm has taken short position in the Adani group stocks as well. They predicted that SEBI may come forward and ensure safety of the retail investors’ money in this Adani-Hindenburg fall out.

Suggesting investors to look for long term instead of short term triggers, Sandeep Pandey, Former Deputy Vice President at HDFC Bank Ltd said, “Adani group stocks have remained a poster boy of the Indian stock market rally in post-Covid times. So, they are in overbought condition without any doubt and hence Adani group stocks are vulnerable to any short term trigger (either positive or negative). An investor needs to look at current Hindenburg Research report on Adani group stocks from the same angle. The short seller has alleged concern over debt position of the Adani group companies and hence panic selling has triggered. So, I am expecting Indian market regulator SEBI to play a big role in current bloodbath on Dalal Street. I believe that once SEBI cones forward, which looks obvious after the panic selling, there would be strong bounce back in Adani group stocks. So, FPO investors are advised to wait and see how long this panic selling continues and how long the market regulator takes to react on this Hindenburg Research report.”

Sandeep Pandey, who currently works as director at Basav Capital went on to add that Hindenburg Research may continue to impact for short term but expected trend reversal immediately after the reaction of SEBI on the matter. He advised investors to stick with their conviction arrived after scanning the financials of the Adani group companies.

As per the ingovern reaction on Hindenburg Research on Adani group, “The strategically timed release of the Hindenburg report on the eve of the follow-on public offering (FPO) by Adani Enterprises Ltd seems to indicate that there was some objective to scare investors. However, the Hindenburg report itself may not impact the FPO share sale.”

The ingovern report went on to add that anchor book has already been oversubscribed on 25th January 2023, given that the objective of many of the long-term investors would be to hold the stock for many years.

“Though the Hindenburg report talks of high valuations and over leverage by the Adani group, the nature of the industries in which Adani group companies operate and data on debt holding in Adani group companies indicate otherwise,” ingovern report added.

Global brokerage firm Jefferies has also reacted to Hindenburg Research on Adani group citing, “Following recent concerns, Adani Group has shared details of debit & leverage levels. Consol debt is at Rs1.6tn (ex shareholder sub-debt) & Debt/ EBITDA is down from 4.3x in FY16 to 3.2x in FY22. Acquisition of cement business may add c.Rs600bn to debt, but also lift cashflow. Diversification of borrowing-mix, has cut share of Indian banks to 33% of debt & 0.5% of sector loans; rest with bonds/foreign banks. We watch for progress, but see low risks for banks.” This can be a big relief for Adani group as it has predicted no selling of Adani stocks pledged at banks in near term.

Adani Enterprises share price outlook

Asked about what technical chart suggests in regard to Adani Enterprises shares, Vaishali Parekh, Vice President — Technical Research at Prabhudas Lilladher said, “Technically, the stock on the daily chart had the major support zone of ₹3130 to ₹3250 levels, which has been decisively broken and also has moved below the significant 200DMA level of ₹3050. The next major support as per the Fibonacci Retracement levels would be near ₹2540 zone, which if sustained can witness a pullback. But for the bias and trend to improve from here on, at least it would need to cross the 3450 zone decisively to establish some clarification.”

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.