Adani Enterprises said on February 1 that it has cancelled its Follow-On Public Offering (FPO) and will return money to its investors amid ongoing controversy after American short seller, Hindenburg Research, accused the company of using tax havens and flagged debt concerns in a report.
"The Board of Directors of the Company at its meeting held today i.e. February 1, 2023 has decided, in the interest of its subscribers, not to proceed with the further public offer (FPO) of equity shares aggregating up to Rs 20,000 crore of face value Rs 1 each on partly paid-up basis, which was fully subscribed," Adani Enterprises said in an exchange filing.
Gautam Adani, Chairman, Adani Enterprises said that the decision was taken amid the fluctuations the group's stocks saw during the day's trading.
“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," Adani said in a press statement.
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He added: "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 company is working with its Book Running Lead Managers (BRLMs) to refund the proceeds received by it in escrow and to also release the amounts blocked into investors' bank accounts for subscription to this issue.
Adani Enterprises crashed over 26 percent to close at Rs 2,180.20 apiece on BSE amid report that Credit Suisse has stopped accepting bonds of Adani companies as collateral for margin loans. Another group stock Adani Ports also hit 20 percent lower circuit to end at 492.15 apiece. The group's fall further intensified as Ambuja Cements slumped 16.56 percent to close at Rs 334.60, while ACC declined 5.96 percent to Rs 1,852.
The company's record domestic stock offering pullback comes after shares in the Adani group suffered a $92 billion crash.
The bonds of the company dived to distressed levels in US trading.
The ongoing plunge in shares of the group's companies was triggered by a report from Hindenburg Research last week, which alleged improper use by the Adani Group of using offshore tax havens and stock manipulation. The research firm also raised concerns about high debt and the valuations of the seven listed Adani companies.
Adani Group has denied the allegations, saying the short-seller's narrative of stock manipulation has "no basis" and stems from an ignorance of law. It has always made the necessary regulatory disclosures, it added.
The FPO, which by the end, saw 112 percent subscription, thanks to a big push from HNI investors on the final bidding day delivered a tepid performance with the retail investors.
In his statement, Gautam Adani also added that the decision will not have any impact on the company's existing operations.
"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,” Adani said.
“It’s unusual for a secondary offering like this to be canceled,” said Ben Silverman, director of research at VerityData told Bloomberg. “Pulling an offering at the last minute doesn’t inspire a lot of confidence right now.”
“The Adani family might need to pledge more shares given the drop in share prices, though they could still maintain a healthy headroom with the portion pledged at no more than 40%, based on our calculation,” Sharon Chen, credit analyst at Bloomberg Intelligence, wrote in a note.