Adani Wins Reprieve as Allies Buy Out Offering

Success of $2.5 billion share sale had been in doubt after a US short-seller accused one of India's largest conglomerates of fraud

Adani Port in Mundra,Gujarat, India

Soumik Kar/Getty Images

The richest man in Asia secured a $2.5 billion show of support in the face of a U.S. short-seller's accusation that he is perpetrating "the largest con in corporate history."

Indian tycoon Gautam Adani's flagship company successfully completed a $2.5 billion stock offering Tuesday, receiving funding from the country's business establishment and key foreign investors. Adani Enterprises' (ADANIENT.NS) share price rose about 3% Tuesday and dollar bonds issued by affiliated companies mounted bigger rallies as the firm sold all of the shares available in its stock offering.

A report by U.S.-based Hindenburg Research caused share prices of the seven Adani companies listed in India to plummet in the past week, wiping out some $68 billion in wealth as of Monday. Hindenburg Research alleged Adani's family controls a web of offshore entities, using them to manipulate share prices and launder funds. Adani said Hindenburg maliciously rehashed previously discredited or officially disproved allegations.

Adani, a close ally of India's Prime Minister Narendra Modi, had charged the attack on his company was "a calculated attack on India [and] the independence, integrity and quality of Indian institutions."

With national honor invoked and the conglomerate's bonds trading at a deeply distressed 30% discount to face value, failing to fully sell out the offering risked further damage to Adani's share price and reputation.

While Adani's allies made sure that did not happen, the offering wasn't an unalloyed success: It generated little enthusiasm among the retail investors he aimed to attract. Interest flagged as shares that had been intended to be offered at a discount ended up being priced above market in the wake of Hindenburg's report.

Demand for shares was heaviest from high-net-worth investors representing India's business establishment. Foreign institutional investors with stakes in Adani also stepped up, with an investment firm managed by the Abu Dhabi royal family investing $400 million after pumping nearly $2 billion into Adani companies last year. Abu Dhabi is part of the United Arab Emirates, a close ally of India.

"The [offering] did get subscribed, thanks to a few institutional as well as large family offices," a Mumbai market analyst told Reuters. "The Hindenburg report has taken a toll on sentiment, especially at the retail level...and the successful closure of the [offering] may not be able to mend the damage anytime soon."

Adani made his first public appearance since Hindenburg released its report, joining Israeli Prime Minister Benjamin Netanyahu on Tuesday to mark the purchase of Haifa's port by Adani Ports (ADANIPORTS.NS) in a partnership with an Israeli company. He did address Hindenburg's allegations.

 India risks damaging its reputation for well-regulated, world-class markets if policymakers, officials, and the business community fail to deal with Hindenburg's claims that Adani has been allowed to remain out of compliance with market rules, wrote Bloomberg columnist Mihir Sharma.

"It isn’t only Indian regulators who need to ensure they address these doubts head-on. This is a crucial test for India’s market economy," Sharma wrote.

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  1. Bloomberg. "Adani Pulls Off $2.5 Billion Share Sale After Jump in Final Bids."

  2. Hindenburg Research. "Adani Group: How the World’s 3rd Richest Man Is Pulling the Largest Con in Corporate History."

  3. Adani Group. "Adani Response," Page 5.

  4. Adani Group. "Adani Response," Page 3.

  5. Reuters. "Adani Investors Rally to $2.5 Billion Share Sale."

  6. Business Standard. "Adani Enterprises FPO: Issue Fully Subscribed on the Last Day With NII Push."

  7. Reuters. "Instant View: Adani's $2.5 Billion Offer Rides Out Share Storm With Investor Backing."

  8. Bloomberg. "Adani Stays Silent on Allegations to Tout Israel Investments."

  9. Bloomberg. "India Can’t Afford to Get the Adani Affair Wrong."

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