Instant View: Adani rides out storm as investors rally behind $2.5 billion share sale

BENGALURU (Reuters) - Gautam Adani's $2.5 billion share sale was fully subscribed on Tuesday as investors pumped funds into his flagship Adani Enterprises Ltd despite a scathing report by a short-seller that pummelled stocks in the Indian billionaire's group.

The follow-on public offering (FPO) is critical for Adani, not just because it will help cut the group's debt, but because its success will be seen as a mark of investor confidence as he faces one of his biggest business and reputational challenges.

COMMENTARY

AMBAREESH BALIGA, INDEPENDENT MARKET ANALYST, MUMBAI

"The FPO did get subscribed, thanks to a few institutional as well as large family offices. The purpose of the FPO was two fold — to raise funds to reduce debt and to broadbase the shareholding. Though they managed to pull through raising funds, they haven't been able to broaden the shareholding as the FPO equity would be in the hands of a few shareholders.

"The Hindenburg report has taken a toll on sentiment, especially at the retail level ... and the successful closure of the FPO may not be able to mend the damage anytime soon. Despite the rebuttal of the Hindenburg report, it would be difficult to expect investors to forget this episode in a hurry."

DEEPAK JASANI, HEAD OF RETAIL RESEARCH, HDFC SECURITIES, MUMBAI

"For Indian markets, one of the concern areas is out of the way for the time being as this was weighing on investor sentiment. Some wealthy people and institutions have put in good amounts based on expectations they have on the company. Since the current market price is below the offer price, the retail subscription was low as investors can rather buy it from the market."

VINIT BOLINJKAR, HEAD OF RESEARCH, VENTURA SECURITIES, MUMBAI

"The fact that the FPO has got fully subscribed reinforces the faith of institutional buyers. We believe that the successful completion of the FPO means that retail participation will return once the sanity prevails around the volatility in the stock.

"The FPO is a step in the right direction, given the fact that interest rates are expected to move up and infusing equity into the business will help fund part of the growth as well as repay some part of the debt which has been the equity stroke capital raising plans of the company."

IPEK OZKARDESKAYA, SENIOR MARKET ANALYST, SWISSQUOTE BANK, SWITZERLAND

"News that Abu Dhabi International is backing Adani by investing $400 million is the trigger of the jump we see in FPO. Adani had lost near $70 billion in market value since the allegations were out, so it looks like the latest news from Abu Dhabi International helped investors give Adani the benefit of the doubt."

SAURABH JAIN, ASSISTANT VICE-PRESIDENT, RESEARCH, SMC GLOBAL SECURITIES, NEW DELHI

"With the issue getting subscribed, I feel that it only shows that investors repose their faith and confidence in the Adani Group and that they do believe in its growth story. With the money coming in, the company will continue to be on a growth path, with the concerns left behind."

ARUN KEJRIWAL, FOUNDER OF KEJRIWAL RESEARCH AND INVESTMENT SERVICES, MUMBAI

"The subscription happening within the three-day period, in the backdrop of Hindenburg's report, is quite noteworthy. The only tinge of disappointment is that retail subscription did not come through. That was their focus area considering the fact that there was a difference between the market price and the floor price of the FPO. It seems that retail investors did not consider the fact that there is more to rates than just the price."

LEONARD LAW, SENIOR CREDIT ANALYST, LUCROR ANALYTICS, SINGAPORE

"Investors would view the successful completion of the FPO as a welcome relief as it implies that the company still has the support of institutional investors. The FPO would help to enlarge Adani Enterprises' public float (thereby partly addressing the issue over the promoters' concentrated shareholding), as well as reduce leverage for the company and improve investor sentiment for the wider group.

"That said, it would be helpful to know the identities of the subscribers, given concerns over investments by offshore shell companies."

RUCHIT JAIN, LEAD RESEARCH ANALYST AT 5PAISA.COM, MUMBAI

"It seems good that the fear which was overdone is finally settled. This should bring confidence back in the Adani group stocks and broader markets too."

(Reporting by Nallur Sethuraman, Bansari Mayur Kamdar, Ankika Biswas and Rama Venkat in Bangalore, and Anshuman Daga in Singapore; Editing by Savio D'Souza)