Hindenburg Effect: Gautam Adani's Rs 20,000 cr follow-on public offer faces crucial day after rout
The secondary share sale by Adani Enterprises (ADEL.NS) opened for retail and institutional investors on Friday, but saw only 1% subscriptions as the company's stock fell 11% below the minimum offer price.
Gautam Adani faces a critical day on Monday with his flagship company's $2.5 billion (Rs 20,000 cr FPO) share sale's second day of bidding overshadowed by a $48 billion rout in the Indian billionaire's stocks which was sparked by a U.S. short seller's report.
Seven listed companies belonging to the Adani conglomerate, which is led by Asia's richest man, saw sharp falls in their values after Hindenburg Research report last week flagged concerns about high debt levels and the use of tax havens.
Adani Group issued a detailed response late on Sunday, saying it complies with all local laws and had made necessary regulatory disclosures. It has called the report baseless and said it was considering taking action against Hindenburg.
For 60-year-old Adani, the stock market meltdown has been a dramatic setback for a school-dropout who rose swiftly in recent years to become the world's third richest man, before slipping to rank seventh on the Forbes list last week.
The secondary share sale by Adani Enterprises (ADEL.NS) opened for retail and institutional investors on Friday, but saw only 1% subscriptions as the company's stock fell 11% below the minimum offer price.
Adani Group told Reuters in a statement on Saturday that the sale remains on schedule at the planned issue price, even as sources said bankers on the country's largest secondary share sale were considering extending the timeline beyond Jan. 31, or tweaking the price due to the fall in its share price.
"It is important for the Adani Group to ensure the share sale goes through -- If they stick to the price and don't reduce it, and the stock doesn't bounce back, nobody will be keen to apply," said Mumbai-based market analyst, Ambareesh Baliga, who advises various family offices.
"Monday's trade will be critical."
In a separate statement on Sunday, Adani Group's chief financial officer Jugeshinder Singh said it is focused on the share sale and is confident it will sail through. He also said its anchor investors have shown faith and remain invested.
'FREE FALL'
Some Adani Group stocks have surged more than 1,500% in the last three years amid aggressive expansion in businesses that include ports, power generation, airports and mining.
Adani Enterprises has set a floor price of 3,112 rupees per share and a cap of 3,276 rupees for the secondary share sale - well above their close of 2,761.45 rupees on Friday.
Arun Kejriwal, founder of Kejriwal Research & Investment, said investors were likely to wait until the last day of the share sale to see if the price band is tweaked.
"I expect that the free fall seen of Friday may abate but recovery back towards a level prior to this fall may be difficult," he added.
Indian regulations say the share offering must receive minimum subscription of 90%, and if it does not the issuer must refund the entire amount.
Maybank Securities and Abu Dhabi Investment Authority are among investors who bid for the anchor portion of the issue.
On Saturday, index provider MSCI said it was seeking feedback from market participants on Adani and was monitoring the factors that "may impact the eligibility of those relevant securities" in MSCI indexes.
There are at least six Adani Group companies in the MSCI India Index, with a cumulative weight of 4.31%.
Get Latest Business News, Stock Market Updates and Videos; Check your tax outgo through Income Tax Calculator and save money through our Personal Finance coverage. Check Business Breaking News Live on Zee Business Twitter and Facebook. Subscribe on YouTube.
RECOMMENDED STORIES
Power of Compounding: How many years will it take to reach Rs 3 crore corpus if your monthly SIP is Rs 4,000, Rs 5,000, or Rs 6,000
IRCTC Dividend 2024: Railway PSU announces 200% interim dividend - Check record date and other details
Power of Compounding: Salary Rs 25,000 per month; is it possible to create over Rs 2.60 crore corpus; understand it through calculations
Reduce Home Loan EMI vs Reduce Tenure: Rs 75 lakh, 25-year loan; which option can save Rs 25 lakh and 64 months and how? Know here
New Year Pick by Anil Singhvi: This smallcap stock can offer up to 75% return in long term - Check targets
PSU Oil Stocks: Here's what brokerage suggests on these 2 largecap, 1 midcap scrips - Buy, Sell or Hold?
Power of Compounding: How many years it will take to reach Rs 2 crore corpus if your monthly SIP is Rs 3,000, Rs 4,000, or Rs 5,000
03:47 PM IST