India’s Adani Enterprises (ADEL.NS) shares rose on Tuesday, the last day for its $2.5 billion secondary share sale, with all eyes on whether the company can secure enough backing for the offering after a U.S. short-seller’s scathing attack.
Billionaire Gautam Adani’s group stocks have sharply fallen after a Jan. 24 report from Hindenburg Research which flagged concerns about high debt levels and the use of tax havens, with cumulative losses now at $65 billion. Adani has called the report baseless.
Adani Enterprises, the flagship firm, was trading 4% higher at 3,000 rupees, still below the lower end of the share sale’s price band of 3,112 rupees.
But other group stocks, including Adani Power (ADAN.NS), Adani Green (ADNA.NS) and Adani Total Gas (ADAG.NS), were down 5%-10%, extending their falls after Adani’s 413-page response to Hindenburg’s allegations failed to boost investor confidence.
The share sale is critical for Adani, not just because it is India’s largest follow-on offering and will help cut debt, but also because its success will be seen as a stamp of confidence by investors at a time the tycoon faces one of his biggest business and reputational challenges of recent times.
An unsuccessful share sale would be a stunning setback for Adani whose group has in recent days repeatedly said investors were standing by its side and the share offering will go through. Adani is now the world’s eighth richest person, down from third ranking on Forbes’ rich list last week.
The issue was subscribed 20% by Tuesday. The anchor portion of the offering – that accounted for 30% – closed last week with investments from investors such as Abu Dhabi Investment Authority. The share sale needs at least 90% subscription to go through.
“The management sounds confident that the offering will be fully subscribed and it does look like they will manage to secure some investments with their connections, since retail demand is unlikely to pick up,” said V. K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services.
“The follow-on public offering has to go through to restore investor confidence.”
The Hindenburg report and its fallout have drawn global attention. Global index publisher FTSE Russell said on Tuesday it continues to monitor publicly available information on the company, in particular from the Indian regulatory authorities.
Hindenburg said in its report it has shorted U.S.-bonds and non-India traded derivatives of the Adani Group. On Tuesday, U.S. dollar-denominated bonds issued by Adani Ports and Special Economic Zone continued their fall into a second week.