Adani stocks decline as fundraising plans spur dilution concerns

BLOOMBERG

Shares of Indian billionaire Gautam Adani’s group declined on Monday after boards of two firms approved proposals to raise as much as $2.6 billion, with market watchers flagging concerns about potential equity dilution.
Adani Enterprises Ltd, the incubator for new group businesses, slid 4.4% — the most intraday since May 3. The firm got a nod to raise as much as 125 billion rupees ($1.5 billion) via a Qualified Institutional Placement or other modes, according to an exchange filing. Adani Transmission Ltd can seek up to 85 billion rupees via similar methods, the utility said separately. The stock, which slumped amid global index provider MSCI Inc’s move to exclude it from an India gauge, lost 4.6% in Mumbai trading.
“The approved fundraising is causing dilution concerns,” said Deepak Jasani, head of retail research at HDFC Securities Ltd in Mumbai, adding that the MSCI decision has also hurt sentiment for group stocks in general.
The fundraising plans from Adani come as the ports-to-power conglomerate continues a comeback strategy after being hit by allegations of accounting fraud and stock manipulation from US short-seller Hindenburg Research in late January. While the group has denied the accusations, it has been in damage repair mode ever since and has tried to win back investors with roadshows and early debt repayments.
Adani Green Energy Ltd was also scheduled to hold its board meeting but deferred it to May 24, citing “certain exigencies.”
Jasani of HDFC Securities also cited an election loss for Prime Minister Narendra Modi’s party in the southern Indian state of Karnataka as weighing on sentiment for Adani stocks. Modi’s grand ambition to turn India into an economic superpower has been key to the group’s stunning rise over the last decade from a regional player to an infrastructure behemoth. Adani Total Gas Ltd, which is also set to be excluded from MSCI’s gauge at the end of this month, was other big loser— falling as much as 4.9%.
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 in the year — when the flagship was planning to raise 200 billion rupees via a follow-on share sale. It scrapped the offering amid the rout spurred by Hindenburg’s report.
The combined market capitalisation of the 10 Adani group stocks is down about $121 billion from the level before the bombshell report was issued on January 24.