NEW DELHI, Feb 1 (Reuters) – Gautam Adani’s flagship company on Wednesday called off its $2.5 billion share sale in a dramatic reversal as the rout sparked by criticism from a U.S. short seller erased billions more of the value of the Indian tycoon’s shares.
The withdrawal from the Adani Enterprises (ADEL.NS) stock offering marks a stunning setback for Adani, the dropout-turned-billionaire whose fortunes have grown rapidly in recent years, in line with the market value of his companies.
“Today’s market was unprecedented and our share price fluctuated throughout the day. Given these extraordinary circumstances, the Company’s Board of Directors felt that moving forward with the show would not be morally correct,” Adani said.
“Our balance sheet is very healthy with strong cash flow and secure assets, and we have an impeccable track record of servicing our debt. This decision will have no impact on our existing operations and future plans,” the billionaire added. in a statement to Indian. Trades.
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Adani, whose global business interests span ports, airports, mining, cement and electricity, is fighting to stabilize his businesses and defend his reputation.
“Once the market stabilizes, we will review our capital markets strategy,” he added.
The January 24 report triggered an $86 billion erosion in the market capitalization of seven listed Adani Group companies. On Wednesday, a day after Adani’s stock sale closed, shares of his group company fell, with shares of Adani Enterprises plunging 28% and others also taking steep cuts.
A Hindenburg Research report last week alleged misuse by offshore tax havens and stock manipulation by the Adani Group. It also raised concerns about the high level of debt and valuations of seven listed Adani companies.
Adani Group denied the allegations, saying the short seller’s share manipulation allegation had “no basis” and stemmed from ignorance of Indian law. The group has always made the necessary regulatory disclosures, he added.
“The pain that hit Adani’s businesses was crippling, so the news of the canceled stock sale is troubling as it was meant to show that the company is still believed by its wealthy investors,” Edward said. Moya, a New York-based senior market analyst at brokerage OANDA.
“Going through this stock sale exercise and canceling it raises more questions.”
Reuters reported earlier on Wednesday, citing a person with direct knowledge, that India’s market regulator was reviewing the Adani Group stock rout, examining several of the allegations made by Hindenburg Research and any potential improprieties in a stock sale by Adani. . Companies.
Hindenburg had disclosed that he held short positions in Adani companies through US-traded bonds and non-India-traded derivatives.
After the cancellation of the stock sale, yields on dollar-denominated bonds issued by Adani companies rose on Wednesday. Bond yields move inversely to prices. Yields on Adani Green Energy’s $500 million bond due 2024 rose from 12.1% to 15.45% on Wednesday.
CRITICAL FUNDRAISING
Fundraising was essential for Adani, not only because it would have helped reduce his group’s debt, but also because it was seen by some as a boost of confidence as he faced the greatest challenge. business and reputation of his career.
Adani Group was working with its bankers to repay the proceeds received by on the secondary sale of shares of Adani Enterprises. Major investors who had backed the issue included Maybank Securities and Abu Dhabi Investment Authority.
The company aims to protect the interests of its investment community by returning the proceeds, she said.
The Adani Group had mustered enough investor support on Tuesday to keep selling shares going, in what some saw as a boost to investor confidence amid the storm.
Wednesday’s stock losses saw Adani slip to 15th on the Forbes rich list with an estimated net worth of $75.1 billion, below rival Mukesh Ambani, chairman of Reliance Industries (RELI.NS), who ranks ninth with a net worth of $83.7 billion.
The share sale was successful on Tuesday even when the Adani Enterprises share price in the Mumbai markets was trading below the offer price of the share sale.
As concerns mounted the stock sale might not succeed, and bankers even considered price cuts and timing changes, Adani issued statements saying he was confident about his outlook and that all his investors stood by his side.
“I don’t know how the markets will behave in the short term. But it’s a measure to improve (Adani’s) reputation since investors were looking at a 30% loss even before the shares were allocated,” he said. said Rajesh Baheti, managing director, Crossseas Capital Services, an algo trading company.
Reporting by Aditya Kalra and Jahnavi Nidumolu in Bengaluru; Editing by Anil D’Silva, Kirsten Donovan and Alexander Smith
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