After nosediving sharply last week, Adani Enterprises and Adani Ports share price hit 10% upper circuit on Monday. However, other Adani Group stocks still continue to be in the red. The performance comes after a fresh round of exchange between Adani and Hindenburg. The Gautam Adani-backed group released a 418 page response on Hindenburg’s allegations, while the US-based firm has retorted back. Adani’s ₹20,000 crore follow-on public offer (FPO) will be in focus today. The Group’s flagship company, Adani Enterprises launched the FPO on January 27 and will close on January 31st. The price band for the issue is fixed at ₹ ₹3,112 and ₹ ₹3,276 per FPO equity share.
Retail investors are top bidders in FPO
In the early deals on Monday, Adani’s FPO received bidding of about 5,83,820 equity shares, at around 11.09 am, as per BSE data. This is compared to the offered size of over 4.55 crore equity shares.
Overall, the bidding in the FPO is at a slower pace.
Of the total bids received so far, retail investors lead the FPO with more than 5 lakh bids in the issue so far. As per the data, the retail investors’ portion received 5,00,908 bids against the reserved size of 2,29,08,464 equity shares. On the other hand, the portion for non-institutional investors received bids of 68,452 equity shares against the reserved size of 96,16,323 equity shares. The demand from qualified institutional investors has continued to stay dull.
Adani Group’s CFO Jugeshinder Singh
In a media interaction, Adani Group’s CFO Jugeshinder Singh said, the Group has given the responses to market regulator Sebi. Once they get any information, they will accordingly disclose it on exchanges.
He also stated that whether Sebi or Attorney General wants to take action in the matter, depends on both of them.
Adding he stated that the Group’s objective has been done, and we have given point by answers to every question along with documents.
It took Hindenburg 2 years, we took two-three days to answer those questions, Singh said.
No change in FPO priceband, timeline
Adani group has clarified that there will be no change in the FPO priceband and timeline. For the company FPO demand was never a concern and expect a full subscription
Out of the total $30 billion debt only or 23% or $9billion is from Indian banks, making it ₹72,000cr
No Ambuja Cement shares have been pledged due to SEBI’s strict rules stake is considered encumbered
Moses Harding John, President & CEO of IndusInd International Holdings response on the matter
John tweeted, “post-Adani’s response (to Hindenburg) establishing the group as systemic important player in growth & prosperity of Indian economy (notwithstanding issues around valuation & debt and lack of great confidence on governance), let good sense prevail in overall equity markets!”
Adani Group’s response on allegations on Vinod Adani
In its 418 page response, Adani gave a common response saying, “Vinod Adani does not hold any managerial position in any Adani listed entities or their subsidiaries and has no role in their day to day affairs. As such, these questions have no relevance to the entities in the Adani portfolio and we are not in a position to comment on your allegations on the business dealings and transactions of Vinod Adani.”
It added, “We reiterate that any transactions by the Adani portfolio companies with any related party have been duly identified and disclosed as related party transactions in compliance with Indian laws and standard and have been carried out on arm’s length terms.”
Did Vinod Adani lent massive sum of money to Adani Group?
Among a series of allegations, Hindenburg specifically brought attention to funds that flowed from Vinod Adani’s associated offshore shell entities through the Adani Group.
Hindenburg gives two examples. Firstly, a 253 million loan from a Mauritius entity where Vinod Adani serves as a director. Secondly, an investment of $692.5 million from a Mauritius entity controlled by the head of the Adani Group’s Private Family Investment Office.
In total, Hindenburg found 38 Mauritius-based entities associated with Vinod Adani and Subir Mittra (the head of the Adani private family office). Also, they found out that Vinod Adani’s associated entities are in other tax haven jurisdictions like Cyprus, the UAE, Singapore, and various Caribbean islands.
Hindenburg’s latest reply is that, “this information is critical to the integrity of Adani’s business, as it indicates whether the company is round-tripping turnover, laundering illicit funds, or using cash to manipulate its stock.”
Adani defense: Vinod Adani is not related party to the Group
To its allegations on billionaire Gautam Adani’s brother Vinod Adani, Hindenburg said, “Adani bizarrely argued that Vinod Adani is not a related party to the Adani Group and that there are no disclosable conflicts relating to the transactions that have collectively moved billions of U.S. dollars through Adani Group entities, largely through offshore shell entities.”
Allegations on Gautam Adani’s brother Vinod Adani
Hindenburg alleged that Adani Group has engaged in billions of dollars in suspicious dealings with its Chairman’s brother, Vinod Adani, and his labyrinth of offshore shell entities.
These entities included 38 entities in Mauritius, along with others in the UAE, Cyprus, Singapore, and various Caribbean islands.
Hence, these dealings raised serious questions about stock and accounting manipulation.
Adani stocks to dominate markets
Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services said, “Today the market will be completely dominated by the movements in Adani stocks. The statement from Adani Enterprises that the FPO is on schedule and that there is no change in the price band is hugely important. This can be interpreted as a reflection of the confidence of the management in the success of the FPO. It is important to understand that the stock has limited public float. So, the price crash on Friday happened mainly due to shorting Adani stocks in general and Adani Enterprises in particular.”
Vijayakumar added, “One possibility is a big short-squeeze in the stock. Huge volatility is in store in Adani stocks today. The sustained selling by FPIs in January with a massive sell figure of ₹5978 crores last Friday is a bit intriguing. Did the FPIs get wind of the storm blowing now? It is important to note that during the last 3 days while Nifty declined by 3.2 %, Bank Nifty declined by 6.3% on concerns of the Adani crisis impacting the banks. The correction in high quality private sector banks is a buying opportunity. Investors may wait for the dust to settle.”
Adani failed to answer 62 of Hindenburg’s 88 questions
Hindenburg says, “Our report asked 88 specific questions of the Adani Group. In its response, Adani failed to specifically answer 62 of them. Instead, it mainly grouped questions together in categories and provided generalized deflections.”
“Of the few questions it did answer, its responses largely confirmed our findings, as we detail,” the firm said.
Read here: ‘Myths of short seller’: Adani gives point by point reply to Hindenberg’s allegations
Hindenburg: Fraud is Fraud
According to Hindenburg’s latest reply, Adani Group predictably tried to lead the focus away from substantive issues and instead stoked a nationalist narrative, claiming that their report amounted to a “calculated attack on India.” In short, the Adani Group has attempted to conflate its meteoric rise and the wealth of its Chairman, Gautam Adani, with the success of India itself.
“We disagree. To be clear, we believe India is a vibrant democracy and an emerging superpower with an exciting future. We also believe India’s future is being held back by the Adani Group, which has draped itself in the Indian flag while systematically looting the nation,” the US-based firm said.
Hindenburg added, “We also believe that fraud is fraud, even when it’s perpetrated by one of the wealthiest individuals in the world.”
Hindenburg’s response to Adani’s 413-page statement
Hindenburg has replied to Adani Group’s 413-page statement on Sunday.
The US-based company released another report titled: “Fraud cannot be obfuscated by nationalism or a bloated response that ignores every key allegation we raised.”
“Adani also claimed we have committed a “flagrant breach of applicable securities and foreign exchange laws.” Despite Adani’s failure to identify any such laws, this is another serious accusation that we categorically deny,” Hindenburg’s note said.
Hindenburg pointed out that Adani’s ‘413 page’ response only included about 30 pages focused on issues related to their report.
The remainder of the response of Adani, Hindenburg said, “consisted of 330 pages of court records, along with 53 pages of high-level financials, general information, and details on irrelevant corporate initiatives, such as how it encourages female entrepreneurship and the production of safe vegetables.”
Adani Total Gas worst hit
Adani Total Gas share price is the worst hit on Monday, nosediving to its 20% lower circuit before correcting.
Adani Green Energy has tumbled by nearly 19%, while Adani Transmission has shed nearly 18% so far in the early deals on BSE.
Adani Power, Adani Wilmar hit another 5% lower circuit
Adani Power and Adani Wilmar hit 5% lower circuit for the third consecutive day on Monday.
At present, Adani Power is trading at ₹235.65 apiece and Adani Wilmar at ₹491.45 apiece on BSE.
Adani Ent, Adani Ports zoom
On Monday, Adani Enterprises and Adani Ports recovered some previous losses. Both the stocks are trading near the intraday highs.
At the time of writing, both Adani Enterprises and Adani Ports stock have hit 10% upper circuit at ₹3,038.35 apiece and ₹658.45 apiece on BSE.
The Accusation:
Hindenburg’s research report dated January 24, said, “we reveal the findings of our 2-year investigation, presenting evidence that the ₹17.8 trillion ($218 billion) Indian conglomerate Adani Group has engaged in a brazen stock manipulation and accounting fraud scheme over the course of decades.”
However, Adani’s top management had denied Hindenburg’s accusations, calling the research report of the latter a “maliciously mischievous, unresearched report”. The management has also called Hindenburg’s report with the principal objective of damaging Adani’s ₹20,000 crore FPO, which is one of the biggest follow-on public offers in India. Also, Adani has given detailed clarity over the accusations by Hindenburg.
Why Adani’s FPO saw dull demand in start?
The lackluster demand came after a US-based firm Hindenburg Research accused Adani of stock manipulation and fraud schemes. This led to overwrought selling in Adani stocks on Friday which also dragged the broader market.
Last week, on Friday, the majority of Adani Group stocks hit their lower circuits, which meant that there existed multiple sellers but no buyers. Adani Transmission, Adani Green Energy, and Adani Total Gas closed at 20% lower circuits each on January 27th. While Adani Power and Adani Wilmar also took a beating to get locked at 5% lower circuits each. Further, Adani Ports also struggled and tumbled by over 16% at the end of the day.
Meanwhile, Adani’s flagship company, Adani Enterprises, which launched its FPO on Friday, plummeted by at least 20% before closing at ₹2,762.15 apiece on the BSE.
FPO’s Day 1!
On the first day of the issue, Adani Enterprises recorded bidding of merely 4,70,160 equity shares on a cumulative basis against the offered size of 4,55,06,791 equity shares, as per BSE data.
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