Going ahead would not have been morally correct: Gautam Adani after Board cancels FPO

Adani Enterprises chairman Gautam Adani addressed investors on February 2 and spoke about the cancellation of the company's follow-on public offering (FPO).

Adani stated that considering volatility of the market seen on February 1, the Board "strongly felt that it would not have been morally correct to proceed with the FPO".

"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 Hence to insulate the investors from potential losses we have withdrawn the FPO," he added.

The chairman said the company 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.

Adani Enterprises crashed over 26 percent to close at Rs 2,180.20 apiece on BSE on February 1 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.

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"The fundamentals of our company are strong. Our balance sheet is healthy and assets, robust," Adani said. "Once the market stabilizes, we will review our capital market strategy."

How the FPO progressed

The Rs 20,000 crore FPO was subscribed only 1 percent on Day 1, receiving bids for 4.7 lakh shares against 4.55 crore shares. By end of Day 2, it was subscribed 3 percent.

On day 3, the final day, non-institutional investors took the front seat and subscribed 332 percent of the portion set aside for them. They bid for 31.93 million shares against the 9.6 million reserved.

Thus, the offer closed with an overall subscription of 1.12x.

One of the anchor investors, IHC, poured in another $400 million, it said in a statement on January 30.

Retail participation, however, was not up to the mark. They bid for only 12 percent of the shares set aside for them as the stock's market price slid below the FPO price band of Rs 3,112-3,276 a share.

Why was the FPO announced in the first place?

The flagship company of the Adani group intended to use the FPO proceeds to fund projects in the green hydrogen ecosystem, improve existing airport facilities, and construct new expressways.

Some debt owed by the company and its subsidiaries (Adani Airport Holding, Adani Road Transport, and Mundra Solar) would have also been repaid with the proceeds.

What happens now?

Group chairman Gautam Adani has said that the company "will continue to focus on long term value creation and growth will be managed by internal accruals."

"Our EBIDTA levels and cash flows have been very strong and we have an impeccable track record of fulfilling our debt obligations," he said.