Gautam Adani’s next hurdles may be harder to clear

Inauguration ceremony after the Adani Group completed the purchase of Haifa Port
Indian billionaire Gautam Adani speaks during an inauguration ceremony after the Adani Group completed the purchase of Haifa Port earlier in January 2023, in Haifa port, Israel January 31, 2023. REUTERS/Amir Cohen

HONG KONG, Feb 1 (Reuters Breakingviews) - It helps to have friendly investors and rich families on hand when finalising a tricky share sale. These groups dragged Gautam Adani’s $2.4 billion capital call across the finish line on Tuesday, despite a selloff triggered by Hindenburg Research’s short attack on the eponymous infrastructure conglomerate. The feat will be hard to repeat though, while the Indian tycoon’s next hurdles might be harder to clear.

Investor interest in Adani Enterprises (ADEL.NS) was underwhelming. Employees bid for barely half the shares reserved for them, retail investors took up just over one tenth of their allocation, and mutual funds showed no interest at all. Large non-institutional investors made up the numbers, raising questions about their motivation for buying shares at a price at least 4% above Tuesday’s closing market price. Those piling in include Abu Dhabi’s International Holding Company (IHC.AD) and India’s Life Insurance Corporation (LIFI.NS).

The next immediate risk is a continuation of the rout which has wiped $65 billion off the combined value of Adani’s seven core listed enterprises. Shares in Adani Enterprises have held up relatively well, falling 14% since Hindenburg levelled accusations of fraud and stock manipulation last week, a charge the company dismisses. But anchor investors in the share offering, including the Abu Dhabi Investment Authority, can start to sell after 30 days. Other buyers including wealthy Indians will be free to dump the stock sooner. Shares in $32 billion Adani Total Gas (ADAG.NS) have nearly halved since Hindenburg published its critical report.

Adani faces other pain points. Though the group will want to refinance multi-billion-dollar loans used to pay for cement deals, foreign banks including Barclays (BARC.L), Deutsche Bank (DBKGn.DE) and Standard Chartered (STAN.L) may now demand tougher terms, and entities related to the tycoon are already pledging more shares of Adani Ports (APSE.NS) as security to lenders. The prices of U.S. dollar bonds across the group are rebounding, but some from Adani Green Energy (ADNA.NS), and Adani Ports still trade at distressed levels near 70 cents on the dollar. Meanwhile, accountants affiliated with EY Global and Deloitte may take a closer look at Adani’s books. The industrialist will also probably have to wait before trying again to diversify the tight shareholding structure of his other listed companies.

All this will act as a brake on growth. Revenue at Adani Enterprises grew 75% in the most recent financial year, and group companies had planned to invest some $150 billion over the next five to 10 years in green hydrogen, logistics, roads, airports, healthcare infrastructure and more. Cash flow will cover some of that, while strategic partners including France’s TotalEnergies (TTEF.PA) and IHC, which picked up 16% of the share sale, may chip in. But to the extent Gautam Adani was counting on debt and equity capital markets to fuel his growth, Hindenburg’s attack may leave lasting scars.

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(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)


The $2.4 billion share sale by Adani Enterprises was fully subscribed on Jan. 31, data released by the Indian stock exchange showed.

Investors bid for 1.12 times the shares on offer. Large non-institutional investors submitted bids for almost five times the shares offered or reserved to them, while employees bid for 0.55 times and individual retail investors for 0.12 times.

International Holding Company, the Abu Dhabi conglomerate, said a day earlier that it would be investing 1.4 billion dirhams, over $380 million, to subscribe to 16% of the follow-on deal.

Shares of Adani Enterprises closed at 2,974 rupees on Jan. 31, up 2.8%, but about 4% below the bottom of the previously guided price range for the offering of 3,112 rupees.

Editing by Peter Thal Larsen and Thomas Shum

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