Adani Enterprises on Wednesday announced the withdrawal of its Rs 20,000 crore follow-on public offering.
The company said it is doing so after considering market volatility and added it would return the money to the investors.
A follow-on public offering is a process where a company raises funds by selling its shares to the public again.
The development comes a day after Adani Enterprises had announced that the follow-on public offering was oversubscribed. It was priced at Rs 3,112-3,276 per share.
Shares of the Adani Group are facing a rout that began soon after a report by United States-based firm Hindenburg Research accused the conglomerate of stock manipulation and improper use of offshore tax havens on January 24. Since then, investors in Adani stocks have lost over Rs 7 lakh crore.
Adani and Hindenburg have indulged in a war of words since the allegations. The conglomerate has called the report a “calculated attack” on India and its institutions.
On Wednesday, the conglomerate’s head Gautam Adani said that given the “extraordinary circumstances”, the company’s board felt that going ahead with the issue would not be morally correct.
“The interest of the investors is paramount and hence to insulate them from any potential financial losses, the board has decided not to go ahead with the FPO [follow-on public offering].”
Adani said that the decision will not have any impact on the company’s existing operations and future plans.
“Our balance sheet is very healthy with strong cashflows and secure assets, and we have an impeccable track record of servicing our debt,” Adani said. “We will continue to focus on long-term value creation and growth will be managed by internal accruals. Once the market stabilizes, we will review our capital market strategy.”
Adani vs Hindenburg
In its report, Hindenburg Research had said that it holds short positions in the Adani Group companies through US-traded bonds and non-Indian-traded derivative instruments. Short positions are “created when a trader sells a security first with the intention of repurchasing it or covering it later at a lower price”, according to Investopedia.
Investment research firms like Hindenburg often engage in “activist short selling”, or making information about companies public in order to trigger a fall in their share prices.
Soon after the report came out on Wednesday, Adani Group had called it “a malicious combination of selective misinformation and stale, baseless and discredited allegations”.
On Sunday, the conglomerate issued a 413-page response, in which it described the Hindenburg Research report as a “calculated attack” on India and its institutions. The Adani Group alleged that the mala fide intention of Hindenburg was apparent as the report was released ahead of a $2.5 billion share sale by its flagship firm Adani Enterprises.
“It is tremendously concerning that the statements of an entity sitting thousands of miles away, with no credibility or ethics has caused serious and unprecedented adverse impact on our investors,” the Adani Group said.
On Monday morning, Hindenburg retorted saying Adani Group cannot obfuscate its fraud by nationalism.
“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,” Hindenburg Research said. It is said that the Adani Group had not given specific answers to 62 of the 88 questions the research firm had posed in its report.
“...It mainly grouped questions together in categories and provided generalised deflections,” Hindenburg said. “In other instances, Adani simply pointed to its own filings and declared the questions or relevant matters settled, again failing to substantively address the issues raised.”
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