Adani Enterprises weighs stock sale months after short-seller turmoil

BLOOMBERG

Less than four months after allegations of fraud by a short seller tipped his business empire into crisis, billionaire Gautam Adani is considering tapping equity markets in a major test of investor confidence.
Adani Enterprises Ltd, the Indian tycoon’s flagship, and at least two other group companies plan to hold board meetings on May 13 to consider raising funds via the sale of shares or other securities. They didn’t disclose how much money they intend to raise or who they’re working with on a potential deal or deals. Shares of all 10 group firms edged higher in Mumbai on Thursday, with the flagship’s stock climbing more than 6%. The group’s dollar bonds also rose.
While the Adani family raised about $1.9 billion selling shares in four firms to US investment firm GQG Partners in early March, none of the group’s main units have tapped the public equity market since the allegations by Hindenburg Research wiped more than $100 billion from the conglomerate’s value. Shares have recouped some of their losses since February, though Adani Enterprises still trades at about half its peak level in 2022.
“The company appears to need the cash now — or they would not be launching an offering before people have forgotten about the Hindenburg report,” said Brian Freitas, an independent equities analyst who publishes on Smartkarma. The discount to Adani Enterprises’s current share price “would have to be in the 10%-15% range for investors to take a look at it, though it also depends on the offer size,” he added.
A successful share sale would go a long way toward cementing Adani’s recovery from the crisis, though much would depend on the terms of the deal and which investors participate. Adani Enterprises is down 49% since the Hindenburg report, with Adani Green Energy and Adani Transmissions down 53% and 65%, respectively.
The latest plans come as Indian stocks broadly are staging an impressive rebound this quarter. The benchmark NSE Nifty 50 Index has jumped about 8% from this year’s low in late March and foreign funds are on course to become net buyers of local equities for a third straight month.
Adani Enterprises posted a 26% revenue gain in the quarter ended March and said profit more than doubled. Still, earlier this month it offered a more conservative capital expenditure guidance in the next one year, aiming to invest $3.8 billion versus an outlined capex of $5 billion given last year.