Adani Group, the Indian multinational conglomerate with interests in various sectors such as ports, logistics, power, and infrastructure, plans to raise up to $2.6 billion through the qualified institutional placement (QIP) route or other modes. Adani Enterprises, the flagship company of the Adani Group, has received approval to raise up to INR125bn ($1.5bn) while Adani Transmission can seek up to INR85bn ($1.2bn) via similar methods. However, the market watchers have flagged concerns about potential equity dilution, causing Adani Group stocks to decline. Adani Enterprises fell 4.4%, while Adani Transmission declined 4.6% in early Mumbai trading.
The fundraising plans come after allegations of accounting fraud and stock manipulation by US short-seller Hindenburg Research in late January, which led to a decline in the Adani Group's market capitalization of $121 billion. The allegations were denied by the Adani Group, but it has been in damage repair mode ever since. The Group has tried to win back investors with roadshows and early debt repayments.
The decline in the Adani Group's share prices started last week after global index provider MSCI Inc. decided to exclude it from an India gauge. The Adani Group has also faced political challenges after Prime Minister Narendra Modi's party lost an election in the southern Indian state of Karnataka. Modi's ambition to turn India into an economic superpower has been key to the Adani Group's stunning rise over the last decade from a regional player to an infrastructure behemoth. However, Adani has said that he hasn't benefited from the proximity. Modi has deflected the issue.
Market watchers are curious about the pricing of any equity deals, given that Adani Enterprises' shares are trading at roughly half the price they commanded earlier this year. The flagship was planning to raise INR200bn ($2.7bn) via a follow-on share sale, but it scrapped the offering amid the rout spurred by Hindenburg's report. The combined market capitalization of the ten Adani Group stocks is down about $121 billion from the level before the report was issued on Jan. 24.
The rebound in Adani Group stocks began when US-based GQG Partners bought stakes from the Adani family in four group companies for $1.9 billion in early March. GQG's Rajiv Jain told Bloomberg then that Adani firms have "phenomenal, irreplaceable assets." In April, the investor said these stocks could be "multibaggers" over five years.
Abhay Agarwal, founder of Mumbai-based Piper Serica Advisors Pvt, said that "While the promoters had deleveraged their own personal loan book by selling their shares to GQG, the companies still needed to deleverage." He added that the only concern for investors would be that this kind of activity assurance would put a cap on the market price for some time because with the free float increasing by issuance of new shares, the demand in the secondary market would reduce.
India's markets regulator is looking into any possible violations as well as unusual market activity in Adani Group stocks in the wake of the short-seller attack. The Supreme Court is awaiting a report from the regulator, which has requested more time as it collates financial data on the conglomerate locally and overseas. The apex court will be hearing the matter on Monday.
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