{"id":32351,"date":"2023-02-05T07:33:29","date_gmt":"2023-02-05T02:03:29","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=32351"},"modified":"2025-04-19T10:47:14","modified_gmt":"2025-04-19T05:17:14","slug":"adani-group-called-off-flagship-companys-fpo","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/adani-group-called-off-flagship-companys-fpo\/","title":{"rendered":"Adani Group called off flagship company\u2019s FPO"},"content":{"rendered":"<h3><strong>What\u2019s in today\u2019s article?<\/strong><\/h3>\n<ul>\n<li><strong>Why in news?<\/strong><\/li>\n<li><strong>What is a follow-on public offer (FPO)?<\/strong><\/li>\n<li><strong>Adani Saga<\/strong><\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>Why in news?<\/strong><\/h2>\n<ul>\n<li>Adani Group called off the Rs 20,000 crore <strong>follow-on public offering (FPO)<\/strong> of its flagship firm, just a day after it was fully subscribed.\n<ul>\n<li>The company came out with a statement, saying that its board decided not to proceed further with the public offer (FPO) in the interest of its subscribers.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>What is a follow-on public offer (FPO)?<\/strong><\/h2>\n<ul>\n<li>An FPO is a process wherein a company that is <strong>already publicly listed<\/strong> in the stock market issues additional shares to investors.\u00a0\n<ul>\n<li>It is similar to an initial public offering (IPO), except that in IPO the issuance or sale of shares is done for the first time.<\/li>\n<\/ul>\n<\/li>\n<li>During an FPO, a company could decide to issue fresh shares to investors, or existing shareholders in the company could decide to sell their shares to other investors.<\/li>\n<li>Companies can float an FPO to raise equity capital for various reasons such as to pay off debt or to improve their capital structure.<\/li>\n<li>FPOs can also be a way for existing shareholders to sell their shares and exit the company.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<h2><strong>Adani Saga<\/strong><\/h2>\n<ul>\n<li><strong>Hindenburg report on Adani group<\/strong>\n<ul>\n<li>Recently, New York-based investor research firm Hindenburg Research accused industrialist Gautam Adani-led conglomerate of brazen stock manipulation and accounting fraud scheme over the course of decades.\n<ul>\n<li>The report claimed that the Adani Group were pulling the largest con in corporate history.\u00a0<\/li>\n<\/ul>\n<\/li>\n<li>It said that key listed Adani companies have taken on substantial debt, including pledging shares of their inflated stocks for loans.<\/li>\n<li>It also said that seven Adani listed companies have an 85% downside on a fundamental basis due to what it called &#8220;sky-high valuations&#8221;.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Impact of this report<\/strong>\n<ul>\n<li><strong>Impact on the Adani Group<\/strong>\n<ul>\n<li>Seven listed companies in the <strong>Adani Group lost billions of dollars in market capitalisation <\/strong>since the release of the Hindenburg report.<\/li>\n<li>The listed Adani firms now have a combined market value of USD 108 billion, versus USD 218 billion before Hindenburg\u2019s report.<\/li>\n<li>It also <strong>wiped off billions of the personal net worth <\/strong>of Adani and relegated him to 22nd spot in the Forbes Real-time billionaire list for 2023.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Systemic risk<\/strong>\n<ul>\n<li>No Adani Group company has ever defaulted on their debt repayments so far.\u00a0<\/li>\n<li>Moreover, the bank debt component in the total debt of the Adani group has only fallen (from 86% in FY16 to less than 40% in FY22).\n<ul>\n<li>This means any potential issue in the repayment is less likely to have any impact on the banking system.<\/li>\n<\/ul>\n<\/li>\n<li>However, it should be noted that liberal investments were made by state entities like LIC, SBI and other public sector banks in the Adani Group.<\/li>\n<li>\u00a0Since, share prices have fallen, these entities may have <u>exposed the county\u2019s financial system to heavy risks<\/u>.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Questions corporate governance practices in India<\/strong>\n<ul>\n<li>The current report may reinforce distrust around corporate governance practices in India Inc.\n<ul>\n<li>If one of India\u2019s largest companies is facing this crisis of governance, people may become suspicious and raise questions.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<li><strong>Highlights relationship between India\u2019s business and political elite<\/strong>\n<ul>\n<li>Critics point out that the saga has shone a light on the relationship between India\u2019s business and political elite.<\/li>\n<li>In this context, they question whether India, faced with accusations of crony capitalism, can become a global economic juggernaut like its nearest Asian competitor, China.<\/li>\n<\/ul>\n<\/li>\n<li><strong>Worries in India\u2019s neighbourhood<\/strong>\n<ul>\n<li>Adani group is involved in infrastructure development in India\u2019s neighbourhood including Bangladesh, Sri Lanka, Nepal and Myanmar.<\/li>\n<li>However, with the group\u2019s slide in fortunes, governments in neighbouring countries are worried about the ability of the group to execute these big-ticket infrastructure projects.<\/li>\n<li>Hence, the current saga has potential to malign India\u2019s image in the neighbourhood.<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<hr \/>\n<h3><strong>Q1)<\/strong>\u00a0<strong>What is Hindenburg Research?<\/strong><\/h3>\n<p>Hindenburg Research is a US-based research team that offers services in forensic financial research, with a focus on equity, credit and derivatives analysis.\u00a0<\/p>\n<p>Their fundamental research often includes studying and reporting on companies with accounting irregularities, unethical practices in business\/related-party transactions, bad management etc.\u00a0<\/p>\n<p><strong>\u00a0<\/strong><\/p>\n<h3><strong>Q2)<\/strong><strong>\u00a0What is Initial Public Offer (IPO)?<\/strong><\/h3>\n<p>IPO can be defined as the process in which a private company or corporation can become public by selling a portion of its stake to the investors.<\/p>\n<p>IPO is the <u>first time a company raises equity capital<\/u> through means of public offering. Once the IPO is done, the shares of the firm are listed and can be traded freely in the open market.<\/p>\n<p>&nbsp;<\/p>\n<hr \/>\n<p><strong>Source:\u00a0<\/strong><a href=\"https:\/\/www.thehindu.com\/business\/markets\/explained-what-made-the-adani-group-call-off-its-fpo\/article66472096.ece#:~:text=On%20Wednesday%2C%20Gautam%20Adani%2C%20chairman,and%20expose%20investors%20to%20losses.\" target=\"_blank\" rel=\"nofollow noopener\"><u>Explained | What made the Adani Group call off its FPO?<\/u><\/a>\u00a0 <strong>|<\/strong>\u00a0 <a href=\"https:\/\/time.com\/6251935\/gautam-adani-group-india-hindenburg\/\" target=\"_blank\" rel=\"nofollow noopener\"><u>Time<\/u><\/a>\u00a0 <strong>|\u00a0<\/strong>\u00a0<a href=\"https:\/\/www.thehindu.com\/news\/national\/as-adani-group-faces-market-storm-indias-neighbours-watch-closely\/article66471466.ece\" target=\"_blank\" rel=\"nofollow noopener\"><u>The Hindu<\/u><\/a>\u00a0 <strong>|<\/strong>\u00a0 <a href=\"https:\/\/indianexpress.com\/article\/business\/gautam-adani-groups-hindenburg-parliament-fpo-highlights-8422111\/\" target=\"_blank\" rel=\"nofollow noopener\"><u>India Express<\/u><\/a><\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Rs 20,000 follow-on public offer (FPO) of Adani Enterprises was called off by the Adani Group.<\/p>\n","protected":false},"author":5,"featured_media":32352,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[],"class_list":{"0":"post-32351","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/32351","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=32351"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/32351\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/32352"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=32351"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=32351"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=32351"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}