Gautam Adani says it would not have been ‘morally correct’ to continue with Adani Enterprises FPO

• Gautam Adani has justified calling off the Adani Enterprises FPO (follow-on public offer), saying it would not have been “morally correct” to go ahead with it.
  
• Adani Enterprises called off the ₹20,000 crore FPO late night on Wednesday after its stock price witnessed an extreme sell-off to fall over 28%.
  
• The company said it will return money to investors who had subscribed to the FPO.
  

In the middle of a storm caused by Hindenburg Research’s report, Gautam Adani posted an emotional appeal and justified calling off the Adani Enterprises FPO (follow-on public offer), saying that it would not have been “morally correct” to continue with it given the rout in the company’s stock price.

“For me, the interest of my investors is paramount and everything is secondary. Hence to insulate the investors from potential losses we have withdrawn the FPO,” said Gautam Adani, founder and chairman, Adani Enterprises.

As of 10 a.m. on Thursday, five out of nine Adani Group companies hit their respective lower circuits. Adani Enterprises shares were down over 5%, too.

Adani Enterprises called off the ₹20,000 crore FPO late night on Wednesday after its stock price witnessed an extreme sell-off to fall over 28%, triggered by reports of investment banker Credit Suisse saying it won’t accept bonds of Adani Group companies as collateral for margin loans.

Adani said that the company will return money to investors who had subscribed to the Adani Enterprises 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,” he said in an exchange filing.

The Adani Enterprises FPO sailed through on the final day thanks to a rapid surge in subscriptions by qualified institutional buyers (QIB) and non-institutional investors – the FPO was subscribed 1.12 times. On the other hand, the retail category witnessed only 12% subscription.

Hindenburg fallout worsens, Adani bonds in distress

The fallout from the Hindenburg tussle has worsened for the Adani Group – the nine group companies have seen a decline of ₹7.45 lakh crore in their combined market capitalization since January 24, when the first Hindenburg Research report was released alleging stock manipulation and accounting fraud.

Making matters worse for the group, Citigroup’s wealth arm joined Credit Suisse on Thursday – the firm has reportedly halted margin loans on bonds of Adani Group companies.

According to a Bloomberg report, Adani Group companies’ bonds have hit distressed levels, falling to 70 cents on the dollar. The yields have also shot up drastically to more than 30% in secondary markets, while junk bonds’ yield stood at 8.14%.

The fall in the Adani Group’s stock prices has also had a massive impact on Gautam Adani’s wealth – from being the third richest person in the world at the beginning of 2023, he’s now down to the 13th position. His wealth has fallen $48.5 billion in this year so far to $72.1 billion and he’s no longer the richest Indian either, behind Mukesh Ambani whose wealth currently stands at $81 billion.

Despite the rapid fall in his companies’ stocks, Adani put on a confident front, saying, “The fundamentals of our company are strong. Our balance sheet is healthy and assets, robust. Our EBITDA levels and cash flows have been very strong and we have an impeccable track record of fulfilling our debt obligations.”

Adani said that for now, the group will manage growth with internal accruals, and that future strategy will be reviewed once the markets stabilize.

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