Gautam Adani’s $2.4bn equity sale has received bids for more than 60 per cent of its shares on offer as it enters the final hours, with the Indian billionaire scrambling to shore up support in response to reports of short sellers targeting the industrial empire.
The equity sale was initially intended to widen the shareholder base of Adani Enterprises, in which Adani owns about three-quarters of the shares. The stock has been criticized for its low trading liquidity.
But after short seller Hindenburg Research released a report last week alleging Adani Group, parent company Adani Enterprises, has been involved in stock manipulation and accounting fraud, the success of the sale became a test of investor faith in the group.
As of 11:33 a.m. in India, the share offer conducted by Adani Enterprises has received bids for about 9 million shares out of a total of 45.5 million sold to the public, about 20 percent.
Another 18.3 million, or 30 percent of the total, has been allocated to anchor investors, including London-listed Jupiter Asset Management, BNP Paribas, Société Générale and Goldman Sachs.
At least 90 percent of the total shares offered must be sold by the end of the day for the deal to close successfully. In India, most deals are usually towards the end of equity sales.
Shares in Adani Enterprises rose about 4.5 percent on Tuesday to Rs3,024 ($37). This is still below the Rs3,112 price target set by the company for the offering and is down 12.5 percent from the stock’s close on January 24, when Hindenburg released the report.
Hindenburg said that the group, whose holdings span the Indian economy from ports to data centers, used offshore entities in tax shelters to artificially inflate the share prices of listed companies, so that they could take on more debt and “put the whole group on a financial footing.” which is unstable”. The report led to nearly $70bn off Adani Group shares.
Adani dismissed the allegations as baseless and threatened legal action against Hindenburg. The group issued its own rebuttal on Sunday, calling Hindenburg an “unethical short seller” and the report a “calculated attack on India”.
A partial recovery in the shares of some Adani Group subsidiaries came after conglomerate Abu Dhabi International Holding Company said it would invest $400 million into the sale of shares, representing about 16 percent of the total offer. It is not clear how much of this stock the company has taken.
“Looking at the demand book so far, it’s nowhere near 90 percent of the subscriptions needed . . . to go through,” said Brian Freitas, founder of Periscope Analytics, a research firm. “That said, maybe the Adani group will get enough investors at the last minute.”
Adani Enterprises bought full-page advertisements and public announcements of the share sale in several national Indian newspapers that were launched on Tuesday.
The Hindenburg charge marks a rare challenge from the market to the Adani Group. The 60-year-old founder and chairman is India’s richest man and hails from Gujarat, the home state of Prime Minister Narendra Modi.
These companies have grown rapidly, pursuing infrastructure, energy, clean power, and other deals in recent years in line with the growing Indian economy.
“This is probably Mr Adani’s biggest test to date, given his high profile and how big the conglomerate is,” said Shumita Deveshwar, chief India economist with TS Lombard.