Adani Group withdraws fully subscribed FPO amid stock manipulation claims

By Arya M Nair, Official Reporter
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Adani Group withdraws FPO
Image Courtesy; Adani Group

Indian conglomerate Adani Group has announced the abandonment of its much-hyped follow-on public offer (FPO) as a result of the crisis triggered by fraud allegations that has cut more than $90 billion in value and raised the prospect of forced asset sales.

According to reports, the company has initiated refund proceeds that it had received as part of its FPO, which was bailed out largely by corporates and foreign investors.

The report named ‘Adani Group: How The World’s 3rd Richest Man Is Pulling The Largest Con In Corporate History’, which was released by the US-based Hindenburg Research on January 24th, 2023, revealed its findings of the 2-year investigation, and evidence that the $218 billion Adani Group has engaged in a brazen stock manipulation and accounting fraud scheme over the course of decades.

It also provided substantial proof that how Mr. Gautam Adani, Founder and Chairman of the Adani Group, has amassed a net worth of roughly $120 billion, adding over $100 billion in the past 3 years largely through stock price appreciation in the group’s 7 key listed companies, which have spiked an average of 819 percent in that period.

The Adani Group, 2 days later the report was released, made a media statement calling Hidenburg’s report malicious and false. But despite the allegations, the Group showed tremendous confidence in the fully-subscribed FPO, based on interaction with institutions and investors.

Adani Group on Hidenburg Research report
Image Courtesy; Adani Group Twitter

The report also claimed that the key listed Adani companies have also taken on substantial debt, including pledging shares of their inflated stock for loans, putting the entire group on precarious financial footing. 5 of 7 key listed companies have reported ‘current ratios’ below 1, indicating near-term liquidity pressure.

The group’s very top ranks and 8 of 22 key leaders are Adani family members, a dynamic that places control of the group’s financials and key decisions in the hands of a few. A former executive described the Adani Group as “a family business”, the report said.

Following the report, a meltdown in Adani Group stocks and bonds begin, with shares in Adani Enterprises plunging 28 percent and Adani Ports and Special Economic Zone dropping 19 percent, the worst day on record for both, according to media reports.

As a result, the private banking arm of the Switzerland-based Credit Suisse AG, stopped accepting bonds of some of the group entities of Adani Group including, Adani Ports & SEZ, Adani Green Energy, and Adani Electricity Mumbai, as collateral for margin loans.

“We upgrade Adani Ports to Outperform from neutral based on attractive valuations (10x Sep 2024E EV/EBITDA) post recent correction. Strong underlying business (178 MT volumes and 1H FY23 EBITDA of $800 billion) with growth (Indian EXIM growth and company-specific share gains on incremental assets, etc) provide downside support,” stated the Credit Suisse statement.

Recently, the diversified Abu Dhabi-based conglomerate, IHC, revealed plans to invest $400 million into the Adani Enterprises FPO, through its subsidiary Green Transmission Investment Holding RSC.

Related: Abu Dhabi’s IHC invests $400mn in Adani Enterprises FPO