Adani Enterprises FPO subscribed just 2% amid allegations by Hindenburg Research

• Adani Enterprises’ ₹20,000 crore follow-on public offer (FPO) has been subscribed just 1% on the end of day 1 on Friday.
• The FPO is the largest in India Inc’s history, and the company raised ₹5,985 crore from anchor investors.
• The stock is trading at a discount to the lower price band of the FPO price.
• The shares are trading at a discount of ₹21 in the grey market.

Adani Enterprises’ ₹20,000 crore follow-on public offer (FPO) has been subscribed just 2% at 12:03 pm on Monday. It’s the second day of the IPO subscription process. By the end of day 1 on Friday, the FPO was subscribed 1%.

The poor demand for the FPO comes after the New York-based Hindenburg Research report alleged on January 24, that the Gautam Adani-led group engaged in stock manipulation and accounting fraud.

As on Monday, shares of Adani Enterprises are up nearly 4% at around 12:47 pm. But, at ₹2,853, the stock is still 9% lower than the lower price band of ₹3,112 of the FPO.

The price band for the issue is fixed at ₹3,112 and ₹3,276 per FPO equity share. The FPO closes on January 31.

Most group stocks have been taking a beating since the report came out. Since January 24, the group’s combined market capitalization fell by ₹5.57 lakh crore, with a fall of ₹3.22 lakh crore on Friday alone. Indian benchmark index Sensex and Nifty50 closed lower by around 1.5% each on Friday, as India VIX shot up 18%.

The shares of all seven listed Adani group companies have been volatile, as the research firm said that it has taken short positions on the group’s US-traded bonds and non-Indian-traded derivative instruments.

Adani Group on Sunday gave a lengthy response to the allegations saying that it is in compliance with all applicable laws and regulations. “We are committed to the highest levels of governance to protect the interests of all our stakeholders," a statement said.

The FPO is the largest in India Inc’s history, and the company has raised ₹5,985 crore from anchor investors already.

Adani Enterprises intends to use the proceeds of the FPO to meet capital expenditure requirements of its green energy projects, and paring down its debt and that of its subsidiaries.

The company’s shares are currently indicating a discount of ₹21 per share in the grey markets. GMP is the premium at which IPO shares are traded in an unofficial market before they are listed on the stock exchanges.

Brokerages ‘cautiously optimistic’
“The timing of the report’s publication clearly betrays a brazen, mala fide intention to undermine the Adani Group’s reputation with the principal objective of damaging the upcoming follow-on public offering from Adani Enterprises, the biggest FPO ever in India,” said Jugeshinder Singh, chief financial officer, Adani Group, on January 25.

Seconding his views, Bengaluru-based proxy advisor InGovern said that there are no new facts in the Hindenburg report, and, at best, it is a compilation of all past allegations against the Adani group with an aim to bring down the stock price.

“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. 1. Valuations is in the eyes of those who have a position and are willing to bet on it. 2. These days, there are many new age companies with no revenue model and with no earnings, Adani stocks may appear to be inexpensive,” said InGovern in a report.

Adani Enterprises’ FPO received mixed reactions from brokerages, who underline that the green hydrogen bet is ‘high risk’. Overall, brokerages maintained cautious optimism while highlighting the risk and rewards of investing in the company.


SEE ALSO: Adani Group stocks witness high volatility amidst war of words between the company and Hindenburg Research
Hindenburg ignores Indian legal processes: Adani Group on the firm's allegations