Adani’s buy now, pay later fundraise could sting

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The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

By Una Galani

HONG KONG, Jan 26 (Reuters Breakingviews) -Gautam Adani is on a mission to win public acceptance for his eponymous group. But what looks like an initial victory may turn bittersweet.

The first stage of a $2.4 billion stock sale by his flagship Adani Enterprises ADEL.NS entity has won over anchor investors, including the well-regarded Abu Dhabi Investment Authority. It is a milestone for the world’s third-richest man and his $230 billion infrastructure empire as it fights off concerns about debt, transparency and a cosy ownership structure, issues that were laid out in a scathing attack on Wednesday by short seller Hindenburg Research.

The 33 investors, whose identity was revealed on the same day, are led by Malaysia’s Maybank and include entities related to Goldman Sachs GS.N, Morgan Stanley MS.N and Citigroup C.N. They are picking up roughly $734 million of stock in India’s largest follow-on issue of new shares by a private sector company. The Adani family, which owns 73% of the $47 billion airports-to-data centre company, aren’t subscribing because the primary aim is to welcome new investors and fund capital expenditure. It’s a bold deal at a time global issuance is sparse. It looks even bolder after Nate Anderson’s U.S. fund alleged fraud and stock manipulation across the group, claims the Indian behemoth dismissed as “baseless and discredited”.

The short attack could make Adani’s fundraise interesting, nonetheless. He’s using a buy-now-pay-later approach to lure investors by asking for only 50% of funds upfront. Partly paid shares come out of a dusty financial playbook. The UK government introduced the arrangement in 1970s and 1980s privatisations of corporate heavyweights including British Telecom and British Airways. Although the scheme still pops up – India’s Tata Steel TISC.NS used it in 2018 and Reliance Industries RELI.NS in 2020 – such instruments are unfashionable because they create an uncertain liability. They can also introduce unwanted arbitrage. Investors are able to sell their partly paid shares any time before the final call date for funds, which is sometimes more than one year in the future.

In good times, the buy-now-pay-later approach might boost the effective rewards on the stock for investors, who have the option to temporarily park the rest of the money they owe elsewhere. In bad times, though, it could impact investors’ ability to sell as a liquid market may struggle to develop. Adani Enterprises shares were mostly unmoved by the U.S. fund’s report. But those of other Adani group companies including Adani Transmission ADAI.NS and some U.S. dollar bonds at Adani Green Energy ADNA.NS and Adani Ports APSE.NS sold off sharply. For Adani investors, buy now, pay later could take on an awkward new meaning.

Follow @ugalani on Twitter


Adani Enterprises said on Jan. 25 that it sold shares worth 60 billion rupees ($734 million) to anchor investors as part of a wider follow-on equity issue by the Indian company. Bidders included the Abu Dhabi Investment Authority (ADIA).

The company on Jan. 18 said it would raise 200 billion rupees ($2.4 billion) through a public offer of new shares priced between 3,112 rupees and 3,276 rupees each, with a discount of 64 rupees per share given to individual retail investors. The company’s shares closed unchanged at 3,442 rupees on Jan. 25 after U.S. short seller Hindenburg Research published a scathing note alleging the wider Adani group was “pulling the largest con in corporate history” including “brazen stock manipulation and accounting fraud” over the course of decades.

Adani group said in a statement it was shocked that Hindenburg had published a report without making any attempt to contact them and dismissed the report as a “malicious combination of selective misinformation and stale, baseless and discredited allegations that have been tested and rejected by India’s highest courts”.

Editing by Lisa Jucca, Oliver Taslic and Thomas Shum


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