Adani Enterprises said in a regulatory filing late on Wednesday (February 1) evening that it has cancelled its Rs 20,000 crore follow-on public offer (FPO). The firm, which was bailed out in significant part by corporations and international investors on Tuesday, will return the profits it had received as part of its FPO.
The remarkable incident occurred when the Adani Group stock market had a significant sell-off after Hindenburg Research published a study accusing the company of “brazen stock manipulation and accounting theft.”An FPO, often referred to as a secondary offering, is a procedure in which a business that is currently publicly traded distributes additional shares to both current owners and new investors.
The Adani FPO was oversubscribed?
In the midst of stock market turbulence on Tuesday, corporations and international investors stepped in to save Adani Enterprises Limited’s FPO.
The FPO received a strong response from qualified institutional buyers (QIBs), including foreign institutional investors (FIIs), non-institutional investors (NIIs), such as family offices of large industrialists that manage their personal wealth, and ultra-high net worth individuals, despite the AEL share’s market price quoting below the issue price on the last day of the issue.
The QIB part had 1.26 subscribers, whereas NIIs had 3.32. FIIs sought for 1.24 crore shares worth Rs 4,127 crore, while corporations offered 1.66 crore shares valued at Rs 5,438 crore.
In contrast, investors only bid for 27.45 lakh shares out of the 2.29 crore allotted, or 0.12 times (12%), of the shares for retail investors. Only 55% of the staff quota received bids, which indicates that it is still undersubscribed.
What ensued ?Wht the FPO cancellation by Adani Group
The collapse of the Adani Group’s stocks and bonds continued on Wednesday, according to Reuters, with shares of Adani Enterprises falling 28% and those of Adani Ports and Special Economic Zone falling 19%. This was both companies’ worst day ever.
Adani Group price falls
The share price of Adani Enterprises plummeted by more than 34% on Wednesday, falling just short of its lower circuit of Rs 1,933.75, to a day’s low of Rs 1,942 from a previous closing of Rs 2,975. The shares ultimately closed at Rs 2,128.70, down 28.45%.
The Adani Group’s bonds are no longer accepted as collateral for margin loans to its private banking clients, according to a Wednesday afternoon India time Bloomberg article.
According to Bloomberg, which cited anonymous sources, the private banking division of the Swiss lender gave notes offered by Adani Ports and Special Economic Zone, Adani Green Energy, and Adani Electricity Mumbai Ltd. a zero lending value.
According to Bloomberg, the Credit Suisse move indicated that the investigation into Adani’s finances was intensifying.
According to the Bloomberg article, when a private bank reduces loan value to zero, customers normally need to make up the difference with cash or another type of collateral; else, their securities may be liquidated.
Considering the FPO, what has the Adani Group said?
According to a statement from the group, the firm is cancelling the finished FPO transaction due to the unusual scenario and the present market instability.
Adani Enterprises Ltd. Chairman Gautam Adani stated, “The subscription for the FPO completed satisfactorily yesterday. Your trust and confidence in the Company, its operations, and its management have been incredibly encouraging and humbling notwithstanding the recent volatility in the stock. I’m grateful.
“However, today’s market has been exceptionally volatile, and our stock price has changed throughout the day. The board of the Company determined that moving further with the matter would not be ethically right given these unique circumstances. Since protecting the interests of investors comes first, the Board opted against moving through with the FPO in order to protect them from any potential financial damages.
What Adani Group said
Adani Enterprises Ltd.’s (AEL) Board of Directors voted against moving further with the fully subscribed follow-on public offer (FPO).
The Company returns the FPO money and cancels the completed transaction in an effort to safeguard the interests of its investment community in light of the exceptional scenario and the present market volatility.
“The Board takes this opportunity to thank all the investors for their support and dedication to our FPO,” stated Gautam Adani, Chairman of Adani Enterprises Ltd. Yesterday, the subscription for the FPO was successfully ended. Your trust and confidence in the Company, its operations, and its management have been incredibly encouraging and humbling notwithstanding the recent volatility in the stock. I’m grateful.
However, the market today has been unlike any other, and our stock price has changed throughout the day. The board of the Company determined that moving further with the matter would not be ethically right given these unique circumstances. The investors’ best interests are of utmost importance, hence the Board opted against moving through with the FPO in order to protect them from any potential financial losses.
We are working with our Book Running Lead Managers (BRLMs) to release the funds held in your bank accounts for subscription to this issue as well as the revenues we received in escrow.
We have a highly solid balance sheet, good cash flows, safe assets, and a proven track record of repaying our obligations. No changes will be made to our current operations or our future plans as a result of this choice. Growth will be controlled by internal accruals as we continue to concentrate on long-term wealth development. We will reevaluate our capital market approach when the market stabilises. We have every faith that you will continue to support us. We appreciate your confidence in us.