Home / Companies / News /  Adani Ent FPO subscribed just 1% on first day

Mumbai: The 20,000 crore follow-on public offering (FPO) of Adani Enterprises Ltd got off to a weak start on Friday with a subscription of just 1%, as the fraud allegations made by Hindenburg Research buffeted Adani group stocks.

The FPO received bids for only 470,000 shares against an offer size of 45.5 million shares, stock exchange data showed.

To be sure, the first-day subscription figures are a poor indicator of the demand for a share sale, as these share sales typically draw the lion’s share of investor demand on the final day of the offering.

The price range of the FPO, running through 27-31 January, has been fixed between 3,112 and 3,276. Retail investors have been offered an additional 64 discount per share. On Friday, Adani Enterprises shares plunged 18.5% to 2,762.15 on BSE, trading below the lower end of the FPO offer price. However, subscribers to the offer need to pay only 50% of the price now, with the remaining 50% to be paid at a later date to be decided by the company.

According to stock exchange data, the institutional investor category of the share sale did not see any subscription on day one, while the portion reserved for retail investors and non-institutional/high net-worth individuals was subscribed 2% and 1%, respectively. A small portion of the share sale reserved for employees saw a 4% subscription.

Ahead of the FPO opening for public subscription, the company raised 5,984.9 crore by allocating shares to anchor investors. The anchor investors, 33 in total, included foreign and domestic institutional investors such as Maybank Securities Pte Ltd, Life Insurance Corp. of India, SBI Employees Pension Fund, SBI Life Insurance Co., HDFC Life Insurance Co, Abu-Dhabi-based sovereign wealth fund ADIA, Goldman Sachs Investment and Morgan Stanley Asia.

“It is still too early to say. It is becoming too hot for people to put in money, but the group still has a lot of influence with institutional investors to ensure sufficient demand for the offer to be successful," said a market expert, speaking on the condition of anonymity.

Meanwhile, Adani group has denied several of the allegations made in the Hindenburg Research report released ahead of the opening of the FPO, according to a presentation made by the Adani group.

The Adani group said 21 questions (related-party transactions and court cases) are nothing but Adani portfolio’s public disclosure from as far back as 2015. Hindenburg had sent the group 89 questions as part of its research into the group. Mint has seen a copy of the presentation. “Hindenburg asked 89 questions in total...21 in total cannot be claimed to be a result of any investigation over a two-year period or any such assertion as they were disclosed in the following public documents all the way back from 2015," the presentation said.

The presentation added that the accounting (or fraud-type assertions) “investigation" was devoid of facts. “Of Adani portfolio’s nine public listed entities, eight are audited by one of the Big 6," it said.

On the issue of leverage, the group said 100 of its firms are rated by three global and seven domestic rating agencies, with this accounting for nearly 100% of its Ebitda.

On revenue or balance sheet being artificially inflated, the group retorted that out of nine listed firms in Adani portfolio, six are subject to specific sector regulatory review for revenue, costs and capex. “In addition to accounts, Sebi, BSE or NSE requirements, six of our listed entities are also obliged to provide regular filings for business regulators. In these cases, revenue claimed expenses and claimed capital expenses are independently reviewed by the regulators as part of the relevant legislation, e.g. Electricity Act," the presentation noted.

Swaraj Singh Dhanjal
" Based in Mumbai, Swaraj Singh Dhanjal is responsible for Mint’s corporate news coverage. For the past eight years he has been writing on the biggest deals in private equity, venture capital, IPO market and corporate mergers and acquisitions. An engineer and an MBA, he started his journalism career in 2014 with Mint. "
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