Adani Group: What has Changed?

Adani FPO has now been oversubscribed by 1.12 times amid huge chaos created by Hindenburg's report on Adani Group and doubts about the success of the FPO. From the data available about the subscribers, it is crystal clear that the non-institutional investors including family offices of wealthy families along with anchor investors have played an important role in the success of FPO.

As far as the subscribers’ interest in the FPO was concerned, for two days, there was hardly any taker of the FPO in the retail and NII segment. However, the investment from Abu Dhabi-based International Holding Company (IHC) worth $400 million in the FPO completely changed the environment and the prices of Adani Group companies not only stopped falling but some shares witnessed an increase.

Post Hindenburg allegations and the equity exposures of many financial institutions like LIC, SBI, mutual funds and pension funds in Adani Group, there are speculations that these financial institutions would lose a lot of money invested in group companies; so will the savers. Not only the equity investors but lenders would also be hit due to the developments post-Hindenburg report. But is it so? Let’s have a look.

The list of the 30 Anchor investors who have invested in the FPO includes some of the biggest names in the global financial world. It includes Abu Dhabi Investment Authority, Goldman Sachs, Citi Group, Nomura, Morgan Stanley, etc. These are the financial institutions which can neither be pressurized by the Adani Group nor are out on some charity mission to help a questionable business group. If they have decided to invest huge money in the FPO, that must be backed by reasons and rationales.

The below chart depicts the performance of shares of Adani Enterprises in the last 1 year. The 52-week high is ₹4,190 and the 52-week low is ₹1,528 and the FPO closing day’s price is ₹2,948. From this information, it can be easily said that the FPO closing day's price was about 95% higher than the 52-week low and 68% higher than the price one year back. Even if the closing day’s price is compared with the last 6-month price, the closing day’s price is at least 10% higher. So, as far as the prices are concerned, there is not a single reason to panic because of the report only because in the last 1 year, nothing significant has changed in the fundamentals (financial and managerial) of the businesses apart from the allegations. Many of the allegations have already been in public for a long time. However, some questions need to be answered by the Adani Group as well as regulators need to act to find the facts about those allegations.

There would be very few who would have gained much from the failure of the FPO of Adani Group. However, there are a lot of stakeholders who had been at a loss if the FPO had failed. The biggest loser in this process would have been none but the retail investors as well as the lenders. Retail investors would have lost a lot of money invested in Adani Group stocks and lenders would not get back their loan money which they now will be getting from the proceed of the FPO. If the lenders get back their money, it improves the lending capacity of the economy in general.

There are many including some investors, economists and politicians who are still dead against the success of the FPO. Why? Because they think that Adani Group is near to Indian PM Shri Narendra Modi; so opposing Adani Group is their religious duty even if it turns out to be a very costly affair for others and the economy! However, they forget their so-called thoughtless opposition of businesses is responsible for killing the business environment in the legendary Calcutta in particular and Bengal in general.

There is no doubt that Hindenburg’s report on Adani has created a negative environment for the Adani Group. However, the way Adani Group has responded with more than 400 pages of response to the 88 questions asked in the report but with the narrative of ‘Nationalism and Attack on India’, it has put more questions on Adani Group than that of Hindenburg. There is no denying that Hindenburg Research came with a report at the time of FPO with a purpose which included profit motives through short selling. But Adani Group cannot hide behind the narrative of “Nationalism and Attack on India’. Rather it should have focused on answering those particular questions only as ‘Nationalism and Attack on India’ must be left to the government agencies to deal with.

Now after the success of the FPO, apart from the Adani Group, it’s the turn of the regulatory bodies to investigate the matter transparently to find the facts and take action against those who are culprits (either Adani Group or Hindenburg Research) as transparency in business transactions are necessary so are the avoidance of unnecessary disturbances in form of such reports for only profit motives (if it exists).

Rajeev K. Upadhyay

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