Adani: Gautam Adani stocks decline as fundraising plans spur dilution concerns

MUMBAI: 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 Saturday. Adani Transmission Ltd can seek up to 85 billion rupees via similar methods, the utility said separately. The stock, which slumped last week amid global index provider MSCI Inc.’s move to exclude it from an India gauge, lost 4.6% in early 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 has said that he hasn’t benefited from the proximity. Modi has deflected the issue.
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 on Monday — 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 capitalization of the 10 Adani group stocks is down about $121 billion from the level before the bombshell report was issued on January 24. The selloff had at one point erased more than $150 billion from the group’s value.
The rebound in Adani stocks began when US-based GQG Partners in early March bought stakes from the Adani family in four group companies for $1.9 billion. GQG’s Rajiv Jain told Bloomberg then that Adani firms have “phenomenal, irreplaceable assets.” In April, the investor said these stocks could be “multibaggers” over five years.
“While the promoters had deleveraged their own personal loan book by selling their shares to GQG, the companies still needed to deleverage,” said Abhay Agarwal, founder of Mumbai-based Piper Serica Advisors Pvt, referring to the Adani family.
“The only concern for investors would be that this kind of activity assurance will put a cap on the market price for some time because with the free float increasing by issuance of new shares, the demand in secondary market would reduce,” he added.
India’s markets regulator is looking into any possible violations as well as unusual market activity in Adani group stocks in the wake of the short-seller attack. The Supreme Court is awaiting a report from the regulator, which has requested for more time as it collates financial data on the conglomerate locally and overseas. The apex court will be hearing the matter on Monday.

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