Adani Enterprises FPO To Be Fully Subscribed On Institutional Demand: Group CFO
Singh says there could be some impact to the retail participation as the current market price is below the FPO price band.
The Adani Group is confident of its flagship firm's follow-on public offering getting fully subscribed even as the conglomerate responded in detail to Hindenburg Research's accusations, alleging that the report of the U.S.-based firm is unsubstantiated and misleading.
The FPO will be fully subscribed backed by institutional investors, Jugeshinder Singh, chief financial officer at Adani Group, said in an interview with BQ Prime.
Adani Enterprises launched its FPO on Jan. 27 and the offer closes on Jan. 31. The company has clarified there is no change to the schedule or pricing. The FPO was subscribed 1% on the opening day as the group stocks plunged.
"Our objective was to expand the share register and retail investors were the specific target of the issue," Singh said. "The second aspect was to increase the coverage and improve the liquidity. The first two will happen with institutional investors coming in."
"We are confident that despite share price volatility they are staying with the transaction," Singh said. "They are ignoring the extreme volatility of the last day. The FPO will be subscribed fully as the institutional demand itself is high."
Singh said there could be some impact to the retail participation in the FPO as the current market price is below the issue price band. "We don't know what will be the final structure in the FPO but there could be some reduced participation by the retail investor."
"We want to end up in the long term where we have significant retail participation. We are confident that we will achieve this."
Legal Options
The group is evaluating legal options against Hindenburg Research for their report. "Our response to the Hindenburg report clearly established either deliberate misrepresentation or willfully with knowledge mis-representing facts," said Singh.
On the allegation of round-tripping of $1 billion on a transaction with Adani Power Ltd., Singh clarified that the company bought an asset under the Insolvency and Bankruptcy Covde through the NCLT-approved process. The original loan was given to Essar Mahan; as part of the process the committee of creditor met and approved the transaction, he said.
In the process there was a non-sustainable ECB loan which the CoC categorised as zero value. As part of the process it was paid $100 to acquire than $1 billion zero value loan, he said.
Hindenburg Research deliberately hid the NCLT and IBC process and reported only one side of the process. Hindenburg has sought answers to “88 questions”—65 of these relate to matters that have been duly disclosed by Adani portfolio companies in their disclosures, the group said in its response.
Their "bogus, misleading, and misrepresenting" report has caused a loss to the domestic investor base, Singh said. "The first thing our legal team is evaluating is what happens if they have to face the justice; they have to face justice in India first," said Singh, adding that how that can be enforced on someone who is sitting at a WeWork desk in New York, because they can simply disappear.
The company has shared the Hindenburg report with Securities and Exchange Board of India, the BSE Ltd., The National Stock Exchange Ltd., and all other statutory bodies, he said.
Offshore Investment Funds
The offshore investment funds discussed in the report have no relationship with Adani group companies, according to Singh. As per the company records, the fund initially invested in Adani Enterprises in 2012. The quantum of investment was Rs 24 crore or $3 million on current conversion rate, he said, adding that it's close to $400 million today. Over the years, Adani Enterprises has demerged Adani Power, Adani Transmission Ltd., Adani Green Energy Ltd. and other investments, he said. The decision to invest is of the fund and Adani has no role in it, he said.
Audit Inexperience
Singh countered the allegation that the group's flagship company was audited by an auditor with little experience. Adani Enterprises is an incubator and its businesses are audited by Big 6 along with regulator-empanelled auditors. The company is currently contemplating appointing a Big 6 auditor.
Watch | Adani Group CFO Jugeshinder Singh talks to BQ Prime:
Disclaimer: Adani Enterprises is in the process of acquiring a 49% stake in Quintillion Business Media Ltd., the owner of BQ Prime.