MUMBAI (Reuters) - Gautam Adani's crucial $2.5 billion share sale was fully subscribed on Tuesday as investors pumped funds into his flagship firm, despite a $65 billion rout in the Indian billionaire's stocks sparked by a short-seller's report.
The fundraising is critical for Adani, not just because it will help cut his group's debt, but also because it is being seen by some as a gauge of confidence at a time when the tycoon faces one of his biggest business and reputational challenges.
Hindenburg Research's report last week alleged improper use of offshore tax havens and concerns about high debt, which Adani denied, but the subsequent market meltdown has led to a dramatic and sudden fall in his fortunes as he slipped to eighth from third in Forbes rich list rankings.
The 30% anchor portion of India's largest ever secondary share sale attracted investors including Maybank Securities and Abu Dhabi Investment Authority, as well as India's HDFC Life Insurance and state-backed Life Insurance Corporation.
The list of investors who participated in the book building, which had gathered only 3% in bids on Monday amid concerns over the rout in Adani's stocks, is not yet public.
By Tuesday, the overall share sale was fully subscribed as foreign institutional investors and corporate funds flooded in, although participation by retail investors and Adani Enterprises employees remained low.
"The purpose of the FPO (follow-on public offering) was two fold – to raise funds to reduce the debt and to broadbase the shareholding ... they haven't been able to broadbase the shareholding," Ambareesh Baliga, a Mumbai-based independent market analyst, said.
The offer closes days after Adani's public face-off with Hindenburg Research, which last week flagged concerns about the use of tax havens and "substantial debt" at the group. It added that shares in seven Adani listed companies have an 85% downside due to what it called "sky-high valuations".
That Adani group has said it complies with all laws and disclosure requirements, calling the report baseless and adding it is considering taking action against Hindenburg.
Support for Adani's share sale came even as the flagship's shares closed at 2,973.9 rupees, up nearly 3% but below the lower end of the sale price band of 3,112 rupees.
Adani Group's total gross debt in the financial year ended March 31, 2022, rose 40% to 2.2 trillion rupees ($26.83 billion). Adani said on Sunday in response to Hindenburg's allegations that over the past decade the group has “consistently de-levered”.
Adani said the Hindenburg report was a "calculated attack" on India and its institutions, while its CFO compared the market rout of its stocks to a colonial-era massacre.
Hindenburg later said Adani's "response largely confirmed our findings and ignored our key questions."
Asked about the Adani-Hindenburg saga, India's chief economic adviser V. Anantha Nageswaran told reporters the "corporate sector as a whole has deleveraged and their balance sheets are healthy. So, what happens to one particular corporate group, is a matter between the market and the corporate group."
Adani had in recent days repeatedly said investors were standing by its side and the share offering would go through. Bankers at one point had considered tweaking the pricing of the issue, or extending the sale, Reuters had reported.
Most of the demand during the public book building process came from non-institutional investors who invested more than 1 million rupees each, with bids totalling five times the shares on offer. The portion for qualified institutional buyers, which includes foreign investors, was 1.2 times subscribed.
Adani Enterprises $2.5 bln share sale https://www.reuters.com/graphics/ADANI-FPO/FPO-ADANI/znvnbkeoevl/chart.png
But domestic financial institutions or banks, as well as domestic mutual funds, made no bids. And demand from retail investors and company employees remained muted, garnering bids of 12% and 55% of shares on offer.
"Investors would view the successful completion of the FPO as a welcome relief, as it implies that the company still has the support of institutional investors," Leonard Law, Senior Credit Analyst at Lucror Analytics Singapore, said on Tuesday.
Adani's firm held extensive discussions over the weekend and through Monday with investment bankers and institutional investors to attract subscriptions, according to two sources with direct knowledge of the talks.
The names of investors is not yet available, but Abu Dhabi conglomerate International Holding Company said late on Monday that it will invest $400 million.
Adani Transmission closed nearly 4% higher on Tuesday after losing 38% since the Hindenburg report, while Adani Ports and Special Economic Zone climbed 2.6%.
Adani Total Gas closed down 10% at its lower price limit, while Adani Power and Adani Wilmar were down 5% each.
Hindenburg said in its report it had 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.
(Reporting by M. Sriram, Chris Thomas, Aditya Kalra, Jayshree Upadhyay, Shivangi Acharya, Anshuman Daga and Bengaluru newsroom; Editing by Muralikumar Anantharaman and Alexander Smith)
