Under the cosh conglomerate Adani Group, led by the billionaire Gautam Adani, deserted its much-extolled follow-on public offer (FPO) on Wednesday. Although this unprecedented move triggers a barrage of questions, Adani Enterprises clarified that the company will refund all proceeds to its investors. This shocking decision came just a few days after the Hindenburg report against the Adani Group alleging fraud and manipulation, caused havoc for the group’s listed companies.
“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 ₹ 20,000 crore of face value ₹1 each on partly paid-up basis, which was fully subscribed,” said Adani Enterprises in a regulatory filing.
The Adani FPO Worth Rs 20,000 Crore
To put it simply, an FPO is a process by which an already listed company issues new shares to investors in order to raise capital. In Adani’s case, the Adani Enterprises FPO was primarily seen to fulfil the company's debt repayment obligations.
Anticipated to be the biggest FPO in the Indian stock market, the Adani Group flagship firm’s share sale was subscribed 1.12 times on the last day of the issue, triggered by strong response from qualified institutional buyers and non-institutional investors. As per afternoon updates from that day, the portion of shares reserved for QIBs in the FPO was subscribed 97 per cent and the shares set aside for non-institutional investors (NIIs) was booked 3.3 times. Since retail investors reportedly did not show keen interest in the FPO, the pie set aside for them, was only booked 11 per cent.
However, even after the Adani Enterprises FPO went through swimmingly on Tuesday, shares of the Adani Group entities like Adani Enterprises, Adani Transmission, Adani Power and so on, crashed on Wednesday, with many of them ending on their respective lower circuits. This massive sell-off was mainly triggered by a report that Credit Suisse stopped accepting bonds of Adani companies as collateral for margin loans.
Joining the Swiss company now, is Citigroup’s wealth division that has also stopped accepting Adani Group’s securities. This is indicative of the growing scrutiny on the conglomerate by global lending firms.
Apart from this, earlier on Wednesday, it was reported by Reuters that the Securities and Exchange Board of India (SEBI) was also looking into the potential irregularities with the Adani Enterprises FPO and the witnessed crash in Adani Group stocks.
In another report, The Guardian raised the question on how the Indian conglomerate, that runs Australia’s contentious Carmichael coalmine and rail project in Queensland, will meet its loan obligations.
As of the last six trading sessions, all listed companies of the Adani Group have been experiencing a selling spree in the markets. What started as a reaction to the Hindenburg report alleging fraud, eventually avalanched with the fall of Adani bonds’ value, the Credit Suisse downgrading, and Citigroup’s latest announcement.
Since the American short-seller raised its allegation, the conglomerate helmed by Gautam Adani has reportedly lost more than $86 billion in market capitalisation. As a result of this, Gautam Adani got kicked out of the world's top10 billionaires list, slipping from 4th to 15th position in a matter of days.