02 Feb , 2023 By : Monika Singh
Adani Enterprises share price rout continued on Thursday as the scrip fell nearly 15% to below Rs 2,000 after the company withdrew its fully subscribed FPO. The stock which saw a stellar run in the last five years – surging more than 800% – has fallen around 40% in just the last five days. Adani Enterprises shares came under pressure from 24 January when a US-based forensic financial research firm, Hindenburg Research released a report alleging that Adani group chairman Gautam Adani added over $100 billion to his net worth in the past three years largely through stock price manip\ulation in the group’s seven key listed companies, which had spiked 819% on an average of during the period. While the conglomerate denied all allegations, and issued a 413-page response to the report, the share price has continued to fall.
The flagship Adani group company on 18 January announced its Rs 20,000 crore follow-on public offer (FPO). The issue opened on 27 January, and concluded on 31 January. Six days after the company proposed India’s largest-ever FPO, Hindenburg Research released its explosive report. During the period Adani Enterprises shares fell around 5.5%, underperforming benchmark BSE Sensex remained flat.
Adani Enterprises issued a statement immediately after the Hindenburg report surfaced. “The report is a malicious combination of selective misinformation and stale, baseless, and discredited allegations that have been tested and rejected by India’s highest courts,” Jugeshinder Singh, Group CFO, Adani, said in a media statement on 25 January. This was followed by another statement from the company on the 26th which said, “We are deeply disturbed by this intentional and reckless attempt by a foreign entity to mislead the investor community… and sabotage the FPO from Adani Enterprises. We are evaluating the relevant provisions under US and Indian laws for remedial and punitive action against Hindenburg Research.”
Hindenburg backed its investigation, report, and responded saying that it welcomes Adani’s ‘threat’ of legal action. “We fully stand by our report and believe any legal action taken against us would be meritless. If Adani is serious, it should also file suit in the US where we operate,” it said. In two days, Adani Enterprises share price fell 19% on BSE. It tanked 16% on 27 January, the first day of the company’s Rs 20,000 crore IPO.
Addressing all the allegations, Adani group on 29 January (Sunday) issued a detailed 413-page response in which it equated the Hindenburg report to a “calculated attack on India”, its institutions and the India “growth story”. The company also called Hindenburg’s report “nothing but a lie”. It also questioned Hindenburg’s motives saying that the report was released with the “admitted intent of Hindenburg to profiteer at the cost of our shareholders and public investors”. The company accused Hindenburg of being an “unethical short seller”.
Hindenburg was quick to respond to Adani’s reply, and reiterated its allegations that Adani is a fraud. The short seller in its response to Adani’s response said that the conglomerate “tried to lead the focus away from substantive issues and instead stoked a nationalist narrative, claiming our report amounted to a “calculated attack on India.” Disagreeing with Adani‘s claim, Hindenburg said, “we believe India is a vibrant democracy… We also believe India’s future is being held back by the Adani Group, which has draped itself in the Indian flag while systematically looting the nation.”
It went on to say that even in the 413-page response, Adani group largely either confirmed or attempted to sidestep their findings. “Our report asked 88 specific questions of the Adani Group. In its response, Adani failed to specifically answer 62 of them. Instead, it mainly grouped questions together in categories and provided generalized deflections,” it said. Amid all this, Adani Enterprises FPO managed to sail through despite negligible participation on the first day, and was fully subscribed on 31 January, the last day of subscription. The issue was subscribed 1.02 times. During this period, Adani Enterprises shares saw some respite as the stock recovered 7% from 27 January’s closing price.
Despite Adani Enterprises FPO sailing through, shares continued to fall on 1 February as the stock snapped a two-day gaining streak to close 28% lower at Rs 2,128 on BSE. In the aftermath of the share price plunge, Adani Enterprises late Wednesday, 1 February called off the FPO. According to the company’s regulatory filing, the decision was taken by the board ‘in the interest of its subscribers’. Adani Enterprises ‘stands by its investors,’ the company said after withdrawing the fully subscribed FPO. The company said that in view of the current market volatility, it would seek to ‘protect its investing community’ by returning the proceeds of the FPO.
Gautam Adani said that the market has been unprecedented, and “our stock prices has fluctuated over the course of the day. Given these extraordinary circumstances, the company board felt that going ahead with the issue will not be morally correct. The interest of the investors is paramount.” The mayhem continued for investors on Thursday as Adani Enterprises shares tanked 10% in the morning trade to hit an intraday low of Rs 1,809 on BSE. From the FPO announcement date till now, the share price has halved. From the closing price of 24 January when the Hindenburg report came out, Adani Enterprises shares have fallen around 47%.
Following the developments in the Adani-Hindenburg face-off, Market regulator SEBI has now decided to examine the crash in Adani Group companies’ stocks. It will also look into any possible irregularities in a share sale by its flagship company, according to a Reuters report. The Reserve Bank of India (RBI) is also looking into the details of banks’ exposure to Adani group companies, and has sought the present status of these loans, according to a media report. The banking regulator has reportedly already reached out to some of the major banks which are the lenders to the group and is engaging with lenders to verify the exposure details. It is to be seen whether SEBI, RBI taking cognizance of the matter stabilises share price in any way.
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