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Journalism of Courage
Adani Enterprises has cancelled its Rs 20,000 crore follow-on public offer (FPO), the company said in a regulatory filing late on Wednesday (February 1) evening. The company will refund proceeds it had received as part of its FPO, which was bailed out largely by corporates and foreign investors on Tuesday.
The extraordinary development has come amid a massive market rout in Adani Group stocks following the release of the Hindenburg Research report that accused the group of “brazen stock manipulation and accounting fraud”.
An FPO, also known as secondary offering, is a process in which an existing company listed on stock exchanges issues new shares to the existing shareholders as well as new investors.
On Tuesday, corporates and foreign investors had bailed out Adani Enterprises Limited’s FPO amid volatility in the stock market.
Despite the AEL share’s market price quoting below the issue price, the FPO was subscribed 1.12 times on the last day of the issue following a strong response from qualified institutional buyers (QIBs), including foreign institutional investors (FIIs) and non-institutional investors (NIIs) such as family offices of big industrialists that manage their personal wealth and ultra-high networth individuals.
The QIB portion was subscribed 1.26 times and NIIs 3.32 times. Corporates bid for 1.66 crore shares worth Rs 5,438 crore and FIIs applied for 1.24 crore shares worth Rs 4,127 crore.
However, the retail investors’ portion was subscribed only 0.12 times (12 per cent) with investors bidding for only 27.45 lakh shares as against the quota of 2.29 crore shares. The employees’ quota also remained undersubscribed with only 55 per cent of the quota getting bids.
The meltdown in Adani Group stocks and bonds resumed on Wednesday, with shares in Adani Enterprises plunging 28% and Adani Ports and Special Economic Zone dropping 19%, the worst day on record for both, Reuters reported.
On Wednesday, share price of Adani Enterprises nosedived more than 34 per cent to hit a day’s low of Rs 1,942 against a previous close of Rs 2,975, just shy of its lower circuit of Rs 1,933.75. The stock eventually settled 28.45 per cent lower at Rs 2,128.70.
Around noon India time on Wednesday, Bloomberg reported that Credit Suisse Group AG has stopped accepting bonds of the Adani Group companies as collateral for margin loans to its private banking clients.
The Swiss lender’s private banking arm assigned a zero lending value for notes sold by Adani Ports and Special Economic Zone, Adani Green Energy and Adani Electricity Mumbai Ltd., Bloomberg reported, quoting unnamed sources.
The Credit Suisse action signalled that scrutiny of Adani’s finances was growing, Bloomberg said.
When a private bank cuts lending value to zero, clients typically have to top up with cash or another form of collateral and if they fail to do so, their securities can be liquidated, the Bloomberg report explained.
A statement by the group said that given the unprecedented situation and the current market volatility, the company is withdrawing the completed FPO transaction.
Gautam Adani, Chairman, Adani Enterprises Ltd said, “The subscription for the FPO closed successfully yesterday. Despite the volatility in the stock over the last week, your faith and belief in the Company, its business and its management has been extremely reassuring and humbling. Thank you.
“However, today the market has been unprecedented, and our stock price has fluctuated over the course of the day. Given these extraordinary circumstances, the Company’s board felt that going ahead with the issue will not be morally correct. The interest of the investors is paramount and hence to insulate them from any potential financial losses, the Board has decided not to go ahead with the FPO.”
The Board of Adani Enterprises Ltd., (AEL) decided not to go-ahead with the fully subscribed Follow-on Public Offer (FPO).
Given the unprecedented situation and the current market volatility the Company aims to protect the interest of its investing community by returning the FPO proceeds and withdraws the completed transaction.
Gautam Adani, Chairman, Adani Enterprises Ltd said, “The Board takes this opportunity to thank all the investors for your support and commitment to our FPO. The subscription for the FPO closed successfully yesterday. Despite the volatility in the stock over the last week, your faith and belief in the Company, its business and its management has been extremely reassuring and humbling. Thank you.
However, today the market has been unprecedented, and our stock price has fluctuated over the course of the day. Given these extraordinary circumstances, the Company’s board felt that going ahead with the issue will not be morally correct. The interest of the investors is paramount and hence to insulate them from any potential financial losses, the Board has decided not to go ahead with the FPO.
We are working with our Book Running Lead Managers (BRLMs) to refund the proceeds received by us in escrow and to also release the amounts blocked in your bank accounts for subscription to this issue.
Our balance sheet is very healthy with strong cashflows and secure assets, and we have an impeccable track record of servicing our debt. This decision will not have any impact on our existing operations and future plans. We will continue to focus on long term value creation and growth will be managed by internal accruals. Once the market stabilizes, we will review our capital market strategy. We are very confident that we will continue to get your support. Thank you for your trust in Us.
