MUMBAI: Institutional investors fully support the Rs 20,000 crore follow-up public offering (FPO) for Adani Enterprises (AEL), although the stock is below the offering price. The reason for this trust is that institutional investors place a high value on the companies that AEL creates within their own group, said a top executive at Adani Group.
As for retail investors, the company is unsure how they will view the issue at the current market price. However, it is confident that some high net worth and ultra high net worth investors (UHNIs) will get involved.
“People don’t invest in AEL because they see value, they invest in the incubating assets. Adani Airport, Adani New Industries, Adani Roads, Adani Digital and Adani Datacentres have value,” Jugeshinder Singh, group CFO, told TOI. “If they are shareholders in AEL then they will receive those shares when these companies are demerged. The underlying value hasn’t changed at all…they want to preserve these (infrastructure) assets going forward,” Singh said.
The group’s chief financial officer believes AEL’s strategic investors will not openly lie about their proposed investments in the offering. “They have confirmed their participation (at the FPO) and we believe that their participation will become evident over the next two days. With our institutional holdings exceeding the value of what we are raising, we believe the FPO will go through as planned. “
However, the company is not sure how retail investors will behave as the current market price is lower than the FPO price. On Friday, BSE shares closed at Rs. 2,762 compared to Rs. 3,112 – the lower end of the price range for the offering. “We’ll see how it (retail part) goes. (Some) ultra-HNIs and HNIs will certainly participate because we already know. Additionally, it’s difficult to comment at this time,” Singh said.
On Tuesday, just days before launching its FPO, Hindenburg Research, a US-based short seller, released a 32,000-word report alleging corporate fraud and wrongdoing by the Adani Group. As a result, the group’s shares fell as much as 25% between Wednesday and Friday, threatening the success of AEL’s mega-fundraising bid.
Asked if the group has a fallback plan if the FPO doesn’t go through, Singh said the difference between AEL’s current move and those of other companies is that it needs capital for a higher growth rate. On the other hand, several companies are raising capital to survive.
“Our raising of capital is linked to the targeted growth. We wanted to raise this capital to target specific parts of our growth to accelerate,” he said. “We can always slow down growth in between because we have this strategic flexibility because we never borrow money just for corporate purposes, we always raise capital for wealth creation purposes and for returns.”
Given the lack of domestic mutual funds presence among institutional investors, Singh said that since AEL is an infrastructure company, its institutional shareholders are mainly long-term players such as life insurers, pension funds and sovereign wealth funds, rather than mutual funds. “For the first time, at least the largest (fund house) subscribed, which is SBI MF,” he said.
Regarding legal action the group had threatened against Hindenburg Research, Singh said that companies within the group would provide any information to the group’s legal department and it would then be up to them to decide how to proceed.
