The report released by Hindenburg Research may not impact Adani group’s FPO share sale, according to InGovern Research.
“The anchor book has already been oversubscribed on January 25, 2023, given that the objective of many of the long-term investors would be to hold the stock for many years. There could be some sentimental hit among retail investors when the FPO opens on 27th January 2023.,” InGovern said.
Four of Adani’s listed companies are on the brink of the delisting threshold due to high promoter ownership, said a report released by Hindenburg Research, an investment research firm with a focus on activist short-selling.
The report also said that five companies in the group (all but Adani Ports and Adani Wilmar) have current ratios below 1.0, suggesting a heightened short-term liquidity risk.
“Though the Hindenburg report talks of high valuations and over leverage by the Adani group, the nature of the industries in which Adani group companies operate and data on debt holding in Adani group companies indicate otherwise,” said InGovern.
The proxy advisory firm noted that Adani group companies are in the infrastructure businesses with monopolistic characteristics. Some of their infrastructure assets like ports are already generating huge cashflows, while some other infrastructure assets are in the gestation period and would be generating positive cashflows in coming years.
“Even slight increases in customer pricing would lead to greater cash inflows. Given the low free float of many of the listed Adani companies, the group can always sell down equity to pay off debt and reduce leverage. The FPO is the first instance from the group to get a greater float and pay debt,” it said.
Adani versus Hindenburg: A perennial battle between the bulls and the bears
InGovern said that the Hindenburg report serves as an opportunity for Adani group to deepen its relationships with long-term institutional investors.
“All Adani group companies need greater equity research coverage by sell side analysts. Equity fund raising by Adani group companies, which otherwise do not have very diverse ownership, will result in wider participation by institutional and retail investors. This will also add free float and help in greater price discovery besides dissuading investors to short sell stocks,” it said.