Adani Enterprises calls off FPO, Money to be returned to investors

After the company’s stock price crashed 28% , billionaire Gautam Adani Enterprises called off its Rs. 20,000 crore follow – on public offer (FPO) and said money will be returned to investors. The decision to not proceed with the FPO despite full subscription was taken at a meeting of the board of directors of the company today.

“Given the unprecedented situation and the current market volatility the company aims to protect the interest of its investing community by returning FPO proceeds and withdrawing the completed transaction,” the company said in the statement.

Citing the unprecedented crash in stock prices, Adani Enterprises Chairman Gautam Adani said the board felt that going ahead with the FPO would not be morally correct under the extraordinary circumstances. The fundraising was critical for Adani, not just because it would have helped cut his group’s debt, but also because it was being seen by some as a gauge of confidence as he faced the biggest business and reputational challenge of his career .

The stocks started tumbling after a report by US – Based short seller Hindenburg Research alleged that the Indian conglomerate had engaged in stock manipulation and accounting fraud scheme over the last few decades. Adani Group, however, refuted the claim as baseless. The group accused Hindenburg of not doing proper research and “copy pasting” from the company disclosures. 

It said that the timing of Hindenburg’s report cleary showed the short seller’s intention to damage “the follow – on public offering from Adani Enterprises, which is the biggest FPO ever in India. However, the Rs 20,000 crore FPO from Adani Enterprises got sailed through and was fully subscribed after high net worth individuals and institutional investors bid strongly. Through, the offer received poor to tepid response from retail investors and employees. 

Switzerland -based investment banking company Credit Suisse has stopped accepting bonds of Adani group as collateral for margin loans to its private banking clients. A sign that scrutiny of the billionaire Gautam Adani’s finances is growing after allegations of fraud by short – seller Hindenburg Research. 

How is the company’s health?

“ Our balance sheet is very healthy with strong cash flows and secure assets, and we have an impeccable track record of servicing our debt. This decision will not have any impact on our existing operations and future plans. 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,” the 60 year – old Adani said. 

SEBI to probe

A Reuters report had said that market regulator SEBI is looking into any possible irregularities in the FPO and a full scale examination of the fall in shares. In the last five , trading sessions , the market capitalisation of all 10 listed Adani companies are down by Rs. 7.5 lakh crore or one-third.

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