MUMBAI, (Reuters) – Gautam Adani’s crucial $2.5 billion share sale was fully subscribed yesterday as investors pumped funds into his flagship firm, despite a $65 billion rout in the Indian billionaire’s stocks sparked by a short-seller’s report.
The fundraising is critical for Adani, not just because it will help cut his group’s debt, but also because it is being seen by some as a gauge of confidence at a time when the tycoon faces one of his biggest business and reputational challenges.
Hindenburg Research’s report last week alleged improper use of offshore tax havens and concerns about high debt, which Adani denied, but the subsequent market meltdown has led to a dramatic and sudden fall in his fortunes as he slipped to eighth from third in Forbes rich list rankings.
India’s largest ever secondary share sale attracted participation from anchor investors including Maybank Securities and Abu Dhabi Investment Authority, as well as India’s HDFC Life Insurance and state-backed Life Insurance Corporation LIFI.NS.
But while the 30% anchor portion of the issue had been subscribed fully last week, the book building had only 3% in bids on Monday, amid concerns over the rout in Adani’s stocks.
By Tuesday the overall share sale was fully subscribed as foreign institutional investors and corporate funds flooded in, although participation by retail investors and Adani Enterprises ADEL.NS employees remained low.
“Investors would view the successful completion of the FPO (follow-on public offering) as a welcome relief, as it implies that the company still has the support of institutional investors,” Leonard Law, Senior Credit Analyst at Lucror Analytics Singapore, said on Tuesday.
“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,” Law added.
The offer closes days after Adani’s public face-off with Hindenburg Research, which last week flagged concerns about the use of tax havens and “substantial debt” at the group. It added that shares in seven Adani listed companies have an 85% downside due to what it called “sky-high valuations”
