Adani Ent pulls FPO in surprise U-turn | Mint – Mint

Billionaire Gautam Adani’s flagship is now working on returning the funds raised from investors lying in an escrow account.

“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 withdrawing the completed transaction,” Adani Enterprises said in an announcement to the stock exchanges late Wednesday evening.

The FPO subscription closed successfully on Tuesday, said Gautam Adani, chairman of Adani Enterprises. “Despite the volatility in the stock over the last week, your (investors) faith and belief in the company, its business and its management has been extremely reassuring and humbling….. However, 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 felt that going ahead with the issue will not be morally correct.”

The company’s withdrawal comes on a day the shares of Adani Enterprises plunged nearly 29%, dealing a massive blow to institutional investors and family offices that rescued the offer on the last day.

“Anchor and HNI investors, who’ve pumped most of the money into the FPO, have hell to pay for, taking a 30% haircut from Day 1 after the offer closed,” a senior banker affiliated with a foreign bank said, requesting anonymity. “The only way to salvage the situation was by calling off the FPO.”

A senior fund manager termed the withdrawal a “disaster”, indicating investors in the offering had become “uncomfortable” after the steep price fall. It could also impact the capital-raising ability of the group.

However, founder Gautam Adani said, “This decision will not have any impact on our existing operations and future plans. We will continue to focus on long-term value creation, and growth will be managed by internal accruals. Once the market stabilizes, we will review our capital market strategy.”

He added that the company was working with the investment bankers to refund the share subscription funds. “Our balance sheet is very healthy with strong cash flows and secure assets, and we have an impeccable track record of servicing our debt,” Adani added.

A day after some family offices were said to have helped salvage the Adani Enterprises FPO, investors dumped frontline group stocks on reports of a Swiss bank refusing to accept Adani Group bonds as collateral for margin loans in light of Hindenburg Research’s allegations of corporate fraud, which the group has contested.

Stocks such as Adani Ports, which hit a 52-week low of ₹459.50, Adani Enterprises, Ambuja Cements, ACC and Adani Total Gas plumbed, erasing a combined ₹1.84 trillion worth of investor wealth in group stocks on Wednesday. The damage over the past five days to the group’s market cap has been to the tune of ₹7.56 trillion, and after Wednesday’s rout cost founder Gautam Adani ceding the richest Indian title to RIL chairman Mukesh Ambani.

Adani slipped to the world’s 15th richest person on the Forbes Billionaire list, having seen his net worth erode by $14 billion to $74.7 billion. Adani Ports plunged by 19.2% to ₹495.15, Ambuja Cements fell by 16.7% to ₹334.10, ACC declined by 6.19% to ₹1,846.45 and Adani Total Gas by 10% to ₹1,897.40.

Adani Enterprises was the top traded stock on NSE at ₹3,436 crore, followed by Ambuja Cements and Adani Ports being the third- and fourth most-traded stocks by value at ₹2,775 crore and ₹2,536 crore, respectively.

The rout in the frontline Adani stocks had a cascading effect on PSU bank stocks like State Bank of India, Bank of Baroda and Punjab National Bank, which slipped 5-8%.

The outlook for the Group stocks remained gloomy even after Wednesday’s rout.

“The investors in Adani Ports, Adani Enterprises, ACC and Ambuja Cements are concerned about the fallout from the Hindenburg report, which has resulted in their rushing for the exit all at once,” said one of the fund managers cited above. Unlike stocks traded only on the cash market, those traded on both cash and derivatives segments—Adani Ports, Adani Enterprises, ACC and Ambuja Cements—don’t have any price circuits, which means their prices can swing more wildly.

The promoter pledge in Adani Ports, for instance, stands at 19.25% after a further 3.25% was pledged on 27 January and 31 January.

The increase in shorting increased to the extent that Ambuja Cements F&O contracts remain banned for trading in the segment as it crossed an exchange threshold in terms of the number of outstanding shares being held by clients.