Adani Enterprises shares tanked 10% in the morning trade as chairman Gautam Adani decided to call off the Rs 20,000 follow-on public offer (FPO). Adani Enterprises shares on 1 February ended a two-day winning streak to settle lower by 26.7% at Rs 2,179.75. The sharp fall in the share price for two consecutive sessions comes after the Adani Enterprises FPO, with a floor price of Rs 3,112, was fully subscribed.
The Group decided to call off the FPO as a result of the tumultuous market conditions and the drastic fall of the share price. When the FPO was announced, the shares were being offered at a 9% discount (from lower price band) from the 18 January closing prices of Rs 3,595.35.The FPO opened on 27 January and on the first day of the issue, the share price tanked below the price band to Rs 2,762 while the scrip recovered a little, on the last day of the issue it still remained under the floor price at Rs 2,975 on the BSE. Since then, the share price continued to tumble, and closed nearly 30% lower than the FPO floor price on Wednesday.
“Given the unprecedented situation and the current market volatility the Company aims to protect the interest of its investing community by returning the FPO proceeds and withdraws the completed transaction,” the Group said in a regulatory filing with the domestic exchanges.
“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,” said Gautam Adani, adding, “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.” This pull will not have any significant impact on the current or future operations of the firm.
While only subscribed 1% on the first day, the FPO was fully subscribed and sailed through on its last day. Reports claim that large industrialists and magnates, such as Mukesh Ambani, Sunil Mittal and Sajjan Jindal, invested in the FPO, helping it reach full subscription. The proceeds for the FPO were to be used to repay portions of the debt accumulated and capex for the Adani firm and its subsidiaries.
The conglomerate came under fire from forensic financial research firm, Hindenburg Research, whose report alleged that Gautam Adani, founder and chairman of the Adani Group, had amassed a net worth of roughly $120 billion, adding over $100 billion in the past three years, largely through stock price appreciation in the group’s seven key listed companies, which had spiked 819% on an average of during the period.