Adani calls off $2.5 billion share sale even as Ackman alleges FPO might be 'rigged'

Adani Enterprises, Gautam Adani's flagship company, called off a record Rs 200 billion ($2.4 billion) share sale late Wednesday.

Meanwhile, American billionaire Bill Ackman has said he wouldn't be surprised if the company's follow-on public offering "was rigged".

"I would not find it surprising if the @AdaniOnline offering was rigged with affiliated buyers in addition to some real institutional participants like ADIHC. This would explain the low retail participation and today’s price decline," Ackman said in a tweet.

Meanwhile, a Forbes report said that two companies accused by Hindenburg Research of assisting the Adani Group in its alleged conspiracy of accounting fraud and stock market manipulation were underwriters in the FPO. This includes Elara Capital (India) Private Limited, a subsidiary of London-based investment firm Elara Capital, and Monarch Networth Capital, an Indian brokerage firm. They are a part of the10 underwriters disclosed by Adani Enterprises in itsoffer agreementfor the sale.

Adani speaks

Chairman Gautam Adani said on Thursday that the decision to pull out of the sale was taken to insulate investors from potential losses. In his first public comments since his empire plunged into crisis, Adani added thatthe withdrawal of a share sale won't impact future plans.

The group will review its capital raising plan once the market stabilises, he said.

In a video address, Adani said the ports-to-airports conglomerate's cash flow has been "very strong" and that it has an "impeccable track record" of fulfilling debt obligations.

Before its cancellation, Adani Enterprises’ follow-on public offering, India’s largest follow-on share sale, was fully subscribed. It included $400 million investment from Abu Dhabi-based diversified conglomerate International Holding Company.

But in a statement late Wednesday, the company decided not to go ahead with its follow-on public offer.

The decision came as the company and its sister firms' shares witnessed a slump on Wednesday. Profit-booking during the end hours of trading came on the back of a Bloomberg report that said Credit Suisse had stopped accepting bonds of Gautam Adani’s group of companies as collateral for margin loans to its private banking clients.

Credit Suisse’s private banking arm has assigned a zero lending value for notes sold by Adani Ports and Special Economic Zone, Adani Green Energy and Adani Electricity Mumbai Ltd, the Bloomberg report said.

Adani Enterprises plunged 28 per cent Wednesday, bringing its losses since the Hindenburg report to more than $18 billion. Adani Ports and Special Economic Zone dropped 19 per cent. Both stocks marked their worst day ever.

This is being seen as a sign that Adani's finances are under growing scrutiny. A Reuters report said that India's market regulator, SEBI, is examining a recent crash in shares of Adani Group and looking into any possible irregularities in a share sale by its flagship company.

Adani Enterprises was offering shares at Rs 3,112 to Rs 3,276 apiece in the offering. The company’s stock closed Wednesday at Rs 2,135.35, which is 31 per cent below the bottom of the price range.

In a statement withdrawing the issue Wednesday night,the company said, "The market has been unprecedented, and our stock price has fluctuated over the course of the day. Given these extraordinary circumstances, the company’s board felt that going ahead with the issue will not be morally correct."

The company further said that it is working with book-running lead managers to refund the proceeds received in escrow. The amounts blocked in bank accounts for subscription to this issue will also be released.

Hedge fund billionaire Ackman's comments are the latest in the numerous Twitter posts since a January 24 report by US-based activist short-selling firm Hindenburg Research that highlighted debt taken by companies under the Adani Group, a $218 billion Indian conglomerate.

The report alleged improper use by the Adani Group of offshore tax havens and stock manipulation. It also raised concerns about high debt and the valuations of the seven listed Adani companies.

The group has denied the allegations, saying the short-seller's narrative of stock manipulation has "no basis" and stems from an ignorance of Indian law. It has always made the necessary regulatory disclosures, it added.

"All transactions entered into by us with entities who qualify as 'related parties' under Indian laws and accounting standards have been duly disclosed by us."

RBI asks lenders for details on debt exposure

Reserve Bank of India asked lenders for details of their exposure to the Adani group, according to people with knowledge of the matter.

This is standard operating procedure in case of unusual newsflow on a company as the normal information-gathering process for the RBI’s large exposure framework involves a time lag, the people said, asking not to be identified as the details are private. Reuters reported the development earlier.

(With inputs from agencies)

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