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Adani bets on big funds for Rs 20k cr FPO –

MUMBAI: Institutional investors are fully backing the Rs 20,000-crore follow-on public offer (FPO) for Adani Enterprises (AEL) even though the stock is below the offer price. The reason for this confidence is that the institutional investors see high value in the companies AEL is incubating within its fold, a top Adani Group executive said.
When it comes to retail investors, the company is not sure how they will look at the issue at the current market price. However, it is confident some high net worth and ultra-high net worth investors (UHNIs) will participate in it.
“People invest in AEL not because they see value, but in the incubating assets. Adani Airport, Adani New Industries, Adani Roads, Adani Digital and Adani Datacentres have value,” group CFO Jugeshinder Singh told TOI. “If they are shareholders of AEL, then when these businesses are demerged, they will get those shares. The underlying value has not changed at all…they want to get those (infrastructure) assets in the future,” Singh said.
The group’s finance head believes that AEL’s strategic investors will not ‘point blank lie’ about their proposed investments in the offering. “They have confirmed they are participating (in the FPO) and we believe that their participation will become obvious in the next two days. Because our institutional participation exceeds the value of what we are raising, we believe the FPO will go through as planned.”
The company, however, is not sure how retail investors will behave, given that the prevailing market price is lower than the FPO price. On Friday, the stock on BSE closed at Rs 2,762 compared to Rs 3,112 – the lower end of the price band for the offer. “We will see how it (retail portion) goes. (Some) Ultra HNIs and HNIs will participate for sure because we already know. Beyond that it’s difficult to comment at this stage,” Singh said.
On Tuesday, just days ahead of the launch of its FPO, Hindenburg Research, a US-based short seller, released a 32,000-word report that alleged corporate fraud and malfeasance by Adani Group. As a result, between Wednesday and Friday, the group’s stocks fell as much as 25% and put a question mark on the success of AEL’s mega fund-raising offer.
Asked if the group has a fallback plan if the FPO doesn’t go through, Singh said the difference between AEL’s current move and that of other companies’ is that it needs capital for a higher growth rate. On the other hand, several companies raise capital for survival.
“Our capital-raise is linked to the growth we target. We wanted to raise this capital to specifically accelerate certain parts of our growth,” he said. “We can always slow down the growth in between because we have this strategic flexibility, because we never borrow money just for corporate purposes, we always raise capital for the purposes of creating assets and based on rate of return.”
On lack of presence of domestic mutual funds among institutional investors, Singh said that as AEL is an infrastructure company, its institutional shareholders are mostly long-term players like life insurers, pension funds and sovereign wealth funds, and not mutual funds. “For the first time at least the largest (fund house) did subscribe, which is SBI MF,” he said.
On the issue of legal action that the group had threatened against Hindenburg Research, Singh said that companies within the group will provide all the information to the group’s legal team and then it would be up to them to decide the next course of action.