Gautam Adani pulls off $2.4bn share sale despite short seller report


Indian billionaire Gautam Adani has succeeded with his $2.4bn equity sale by securing bids to cover all shares on offer despite a short seller report targeting his industrial empire.

The equity sale, intended to widen the shareholder base of Adani Enterprises, became a test of investor faith after short seller Hindenburg Research released a report last week alleging that Adani Group, the conglomerate’s parent company, had engaged in stock manipulation and accounting fraud.

For the share sale to be a success, it needed to place more than 90 per cent of the offer. As of 4.12pm in India, the follow-on share offer by Adani Enterprises had received bids for about 51mn shares, exceeding the total of 45.5mn being sold to the public.

Another 18.3mn have been allocated to anchor investors, including London-listed Jupiter Asset Management, BNP Paribas, Société Générale and Goldman Sachs.

Shares in Adani Enterprises rose about 2.8 per cent on Tuesday to Rs2,974. This was still short of the Rs3,112 price floor set by the company for the offering and down almost 13.6 per cent from the stock’s close on January 24 before Hindenburg released its report.

Offers of more than Rs1mn from non-institutional investors accounted for more than 60 per cent of bids for shares on sale to the public, according to exchange data. Brokers said there was strong demand from wealthy Indian investors but domestic retail traders and Indian mutual funds avoided the deal.

“This looks like high-net-worth people Adani reached out to for support for the [offering] came through,” said one Mumbai-based broker.

Hindenburg’s report alleged that Adani Group, whose holdings span a swath of the Indian economy from ports to data centres, used offshore entities in tax havens to artificially inflate the share prices of its listed companies, allowing them to take on more debt and “putting the entire group on a precarious financial footing”. The report caused a near-$70bn wipeout of Adani Group stocks.

Adani has rejected the allegations as baseless and threatened legal action against Hindenburg. His group published a rebuttal on Sunday, calling Hindenburg an “unethical short seller” and the report “a calculated attack on India”.

The partial recovery in the shares of some Adani Group subsidiaries came after Abu Dhabi-based conglomerate International Holding Company said on Monday that it would invest $400mn into the share sale, representing about 16 per cent of the total offer. It is not yet clear how much of this stake the company has already taken.

Adani Enterprises bought full-page advertisements and public announcements about the share sale in several national Indian newspapers, which ran on Tuesday.

Hindenburg’s allegations mark a rare challenge to the Adani Group. Its 60-year-old founder and chair is India’s richest man and comes from Gujarat, the home state of Prime Minister Narendra Modi.

His companies have expanded rapidly, clinching infrastructure, energy, clean power and other deals in recent years in tandem with India’s growing economy.

The chief executive of Norway’s $1.3tn oil fund told the Financial Times that it had “very little exposure” to Adani and had sold down some holdings.

“We have sold out of quite a few [of Adani companies] and we have reduced in some of the others. So we have very, very little exposure compared with what you would have expected us to have,” Nicolai Tangen said.

The world’s largest sovereign wealth fund had also reduced its positions in Adani companies because of risks such as potential corruption, environmental damage and human rights abuses, Tangen added.

“It’s a complex situation. We have a separate department that is looking at risk-based divestments . . . We started to look at this a long time ago, and so we have taken a lot of exposure out.”

The oil fund, which on average owns 1.3 per cent of every listed stock globally, had holdings at the end of 2022 of 0.3 per cent in Adani Ports and Special Economic Zone, 0.17 per cent in Adani Total Gas and 0.14 per cent in Adani Green Energy.

At the end of 2019, it had a 0.75 per cent stake in Adani Ports, which it has since placed on its observation list because of its relationship with armed forces in Myanmar.

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