The parent company Adani Enterprises will finance Rs 12,500 crore via a qualified institutional placement (QIP), while Adani Transmission, a power distributor, will secure Rs 8,500 crore in funds.
In a remarkable turnaround just a few months after a negative report from a short seller plunged the company into turmoil, leading to a significant drop in stock prices and damaging investor sentiment, two companies under the ownership of billionaire Gautam Adani are set to raise a whopping Rs 21,000 crore through the issuance of new shares. This impressive feat marks a significant recovery for companies and demonstrates the continued confidence of investors in the Group.
According to separate regulatory filings made after their board meetings, both companies have announced plans to raise funds through the issuance of shares and/or other qualifying instruments, using mechanisms such as QIP or other legal means. The companies’ Board of Directors has granted approval for the issuance of a specified quantity of equity shares, valued at Rs. 10 each, to raise a maximum amount of Rs. 8,500 crores.
While the companies have not disclosed the motive behind this fundraising endeavour, experts at Group have suggested that the funds will be utilized to reinforce the financial positions of both Adani Enterprises and Transmission. To proceed with the fundraising plans, both companies will require the approval of their respective shareholders. In order to obtain consent from shareholders and to undertake any necessary actions related to the issuance of securities, the Board has decided to use a postal ballot mechanism.
The announcement regarding Adani Green Energy’s fundraising, which was initially slated for release today, has been rescheduled for May 24th following a board meeting. This financing endeavour is anticipated to offer a sense of security to investors, easing any apprehensions they may have had regarding the parent company’s capacity to honour its outstanding debt obligations.
The company’s financial stability was called into question after a critical report from a short-seller in the United States, which caused a crisis for the conglomerate. However, the upcoming financing is likely to quell investor apprehensions and help rebuild their confidence in the company.
The Hindenburg dispute, which is currently being heard by the Supreme Court, has also contributed to the stock’s decline. In January, Hindenburg published an analysis of the company, reducing the valuation of the Group by approximately $145 billion. Despite these accusations, the Gautam Adani-led company has vehemently denied any wrongdoing and is currently devising a plan for its comeback.
Adani and his family have recently embarked on their second fundraising event, following a March sale of shares in four Adani businesses – Adani Enterprises, Adani Transmission, Adani Green Energy, and Adani Ports & SEZ – to US-based asset management firm GQG Partners, which is listed on the Australian Stock Exchange. In contrast to a public offering like an FPO, a QIP involves a private placement that is closed more rapidly and entails a corporation issuing shares exclusively to experienced institutional investors, rather than the general public.
Publicly listed companies may use a QIP as a means of raising capital by issuing equity shares, fully or partially convertible debentures, or other securities convertible into equity shares, excluding warrants. As a result of a QIP, promoters’ interest in the company’s post-equity capital will also decrease. It is important to note that a QIP is only available to institutional investors or qualified institutional purchasers, unlike an IPO (initial public offering).
Mookerjee suggests that leveraging QIP can aid companies in broadening their investment portfolio. Adani and his family have a significant stake in Adani Transmission, with direct and indirect ownership of 72% and 69% in Adani Transmission and Adani Enterprises, respectively.
On the Bombay Stock Exchange, Adani Transmission and Adani Enterprises closed on Friday at Rs 1,965 and Rs 885, respectively. Despite the recent uptick in stock prices for all of Adani’s ten publicly-traded companies, they are still a long way off from the peaks they hit prior to January 24, the day the Hindenburg report was made public.
On May 10th, the Group’s three firms, namely Adani Enterprises, Adani Green, and Adani Transmission, informed the stock exchange about a scheduled board meeting to assess their financing plan. The companies are contemplating launching a fundraising initiative that could potentially raise $5 billion.
In April 2022, the three firms managed to secure more than $2 billion in investments from Abu Dhabi-based International Holding Company PJSC. The success of this proposed fundraising campaign would be a significant test of investor confidence in the business empire.
This test comes after the cancellation of the flagship company’s Rs 20,000-crore further public offering (FPO) in February 2022, which was fully subscribed. The cancellation came amidst allegations of widespread fraud by Hindenburg Research, a short-seller that had published a report on the conglomerate.
Allegations from the Hindenburg Group, a US-based short seller, have caused a decline in share prices. Despite this setback, billionaire Gautam Adani has expressed confidence that the Group’s business ventures will remain unaffected. To restore investor confidence and counter the negative impact of the short seller’s claims, the Group recently sold shares in four companies to GQG Partners, a US investment firm, generating nearly $1.9 billion. Group also organized investor roadshows and cleared its debts.
However, the Adani Group’s financial activities are under scrutiny as it faces investigations by a committee established by the Supreme Court and the Securities and Exchange Board of India (SEBI). The Supreme Court has ordered SEBI to investigate the allegations within two months, and a panel has been set up to devise strategies for safeguarding investors in the wake of the Hindenburg’s damage, which amounted to over $140 billion in the conglomerate’s market value. Despite these challenges, the Group remains committed to its business objectives.
The expert group established by the top court has delivered its report, which was received to determine if there was a lack of regulatory oversight. The Sapre panel was tasked with conducting a thorough analysis of the situation, considering the relevant causal factors that have contributed to market volatility in recent times. The panel’s mandate was to provide recommendations aimed at improving the legal and/or regulatory framework and ensuring compliance with the existing framework for the protection of investors. The Supreme Court has received four Public Interest Litigations (PILs) on this matter, each filed by lawyers M. L. Sharma and Vishal Tiwari, as well as Congresswoman Jaya Thakur.
On Thursday, the index provider Morgan Stanley Capital International (MSCI) declared that it has opted to exclude two Adani group companies, namely Adani Transmission and Adani Total Gas, from its India Standard Index. These modifications will take effect on May 31, 2023. According to an announcement made by MSCI on May 5th, 2023, these two will undergo some Foreign Inclusion Factor (FIF) modifications in the May 2023 Index Review. The rejig is a significant setback for the Adani group companies, who are striving to project resilience in the aftermath of the Hindenburg report.
Proofread & Published By Naveenika Chauhan
