Adani Group's decision to raise fresh funding via QIP sends a strong signal to investors

The fundamentals and the business prospects of Adani Group firms have not changed despite all the allegations made by Hindenburg,” says Deven Choksey, Promoter of KRChoksey Group. A market veteran who has seen the fortunes of many a company flounder or prosper over the years, Choksey would know. The Adani Group has been in the news for most of 2023, primarily due to a damaging report put out by short-seller Hindenburg Research that pushed all the group firms’ stock prices into free fall.

Despite that, these firms are carrying on with business as usual. Recently, some have even announced plans to raise fresh funds, a feat they couldn’t have achieved earlier this year after the Hindenburg episode forced it to withdraw the Rs 20,000-crore follow-on offer (FPO) of Adani Enterprises.

Now, Adani Enterprises and Adani Transmission have secured Board approvals to raise a total of Rs 21,000 crore by way of qualified institutional placements (QIP), where new shares are issued to select institutional investors to raise funds. That’s not all. The Board of Adani Green Energy is also scheduled to meet on May 24 to approve a fund-raising plan to the tune of Rs 5,000-7,000 crore, according to market sources.

Incidentally, the QIP will see promoter entities further dilute their stakes in the group firms as it will comprise entirely of a fresh issuance of shares. This assumes significance as the latest round comes soon after the US-based GQG Partners had bought shares worth $1.87 billion in four group firms from the Adani Family Trust in March 2023.

Meanwhile, the decision to raise funds through the QIP route is yet another measure by the Gautam Adani-led business house to send a strong signal to the markets—that the Hindenburg issue or the ongoing developments at the Supreme Court will not hamper its business plans. Interestingly, the past few months have seen the conglomerate repay its bondholders and release share pledges worth a total of $3 billion.

Market participants further say that recent roadshows, with institutional investors, bankers and bondholders, have seen the group claim that it will achieve an Ebitda growth of 20 per cent.

The last quarter (Q4FY23) numbers of all the listed group entities that have reported their results have been strong, with most of them beating street estimates. Moreover, if shareholding details of the Adani firms are anything to go by, it seems that investors have also shown confidence in the group, with the quantum of retail investors’ stake in all the nine listed firms having increased between December 2022 and March 2023. Foreign portfolio investors, meanwhile, have upped their stakes in four entities, while paring it in five, even as mutual funds continue to stay away from most of the group companies. Barring the recently-acquired ACC and Ambuja Cements, and Adani Ports & SEZ to some extent, mutual funds have largely stayed away from other Adani Group companies. Still, the March 2023 quarter saw mutual funds reduce their holdings in Adani Enterprises, Adani Ports, Adani Green Energy and Ambuja Cements.

While it is a given that the group would have found the going much easier had the Hindenburg report not hit, it has largely focussed on maintaining a steady pace of operations to calm the frayed nerves of its stockholders. “The kind of fundraising that they are doing now is part of the business targets that they have set for themselves. It has nothing to do with the Hindenburg matter,” says Choksey. “Under normal circumstances as well, they would have come to the market to raise funds, though they would have done it at a different price.”

Going ahead, the markets would be keenly following the group firms’ results to see how they have performed in the quarter that was marred by the Hindenburg allegations, which led to over $100 billion in investors’ wealth being eroded in the span of a few days.

Interestingly, the report of the Supreme Court-appointed expert committee is being looked upon as a positive for the conglomerate as it does not have any significant adverse remarks or finding against the firms. That is despite the fact that capital markets regulator Securities and Exchange Board of India has said that some foreign investors of the group are under the scanner. But it has added that it has not found any pattern of artificial trading yet.

Not surprisingly, the analyst community is rallying firmly behind the group, highlighting the strong fundamentals and robust potential of its businesses. 

@ashishrukhaiyar