Adani Group calls off ₹20,000 crore FPO, says will return money to investors

Given the unprecedented situation and the current market volatility, the company aims to protect the interest of its investing community by returning the FPO proceeds and withdraws the completed transaction, the Adani Group said in a statement. File
| Photo Credit: Reuters

As it’s stocks plunged with flagship Adani Enterprises dropped by 28%, Ahmedabad based Adani Group late Wednesday, February 1, 2023 night decided to call of it’s ₹20,000 crore FPO in a rare move amidst growing impact of Hindenburg report raising allegations of “stock manipulation and accounting fraud.” 

The follow-on public offer (FPO) was fully subscribed on the final day of the subscription on Tuesday with help from some big Indian conglomerates, as per the sources in the market. 

Also read | Warning bells: On the Adani saga

In a statement, Adani Enterprises said: “Given the unprecedented situation and the current market volatility the Company aims to protect the interest of its investing community by returning the FPO proceeds and withdraws the completed transaction.”

Gautam Adani, Chairman, Adani Enterprises Ltd said, “The Board takes this opportunity to thank all the investors for your support and commitment to our FPO.”

“Today the market has been unprecedented, and our stock price has fluctuated over the course of the day. Given these extraordinary circumstances, the Company’s Board has decided not to go ahead with the FPO. We are working to refund the proceeds received by us in escrow and to also release the amounts blocked in your bank accounts for subscription to this issue,” Mr Adani added. 

The board announcement came hours after the market regulator has apparently launched a full scale probe into the allegations levelled in the U.S. based short seller Hindenburg Research’s report. 

According to Rueters, the SEBI is investigating any suspected violations in the FPO and is reportedly looking into allegations that Adani entities failed to declare related party transactions as required and used sprawling network of offshore entities based in tax havens, the allegations dismissed by the Adani Group. 

During the day in Wednesday, 10 listed firms of the Adani Group witnessed massive rout as stocks plunged from 3 to 28 %, deepening the crisis triggered by the report. 

After Wednesday’s rout in its shares, it appears that the beleaguered conglomerate is heading for a major crisis of confidence because the global brokerage firm Credit Suisse has now assigned a zero lending value for the bonds sold by three group firms like Adani Ports and SEZ, Adani Green Energy and Adani Electricity Mumbai.

In just five trading sessions since the U.S. short seller Hindenburg Research published its investigation report alleging accounting fraud and stock manipulation by the Gujarat based Adani Group, its shares in 10 listed firms have seen massive losses. 

The combined market value of the group shares has eroded by more than 35 % in just five trading sessions wiping out around 7.4 lakh crore from the combined market capitalisation of the group. 

“There appears no end to the crisis as of now,” a top stock broker from Mumbai told The Hindu. 

Wednesday saw rout in its cement stocks with ACC down by 6.2 % and Ambuja Cement down by as much as 16.7% while the recently acquired NDTV’s stock declined by around 5%. The Group had acquired ACC and Ambuja from Switzerland’s Holcim Group last year. 

Even as the shares of the group were hammered on the bourses after the damaging report from Hindenburg, so far there has been no statement either from the government of India or the market regulator SEBI about the allegations regarding corporate governance issues in the group. 

However, the Adani Group in a strong rebuttal on January 26th has dismissed all allegations and instead described the US based short seller’s report as a “calculated attack on India” and its “judiciary and regulatory framework.” 

Meanwhile, after the swift rout in the shares of its listed firms; Gautam Adani lost the title as Asia’s richest person to rival billionaire Mukesh Ambani, according to the Bloomberg Billionaires Index.

Mr Adani, who ranked third richest in the billionaire list till the last week of January, has now dropped to 15th position on Wednesday as his group stocks tumbled in the aftermath of the Hindenburg report.