Jan 30, 2023
Abu Dhabi’s IHC Invests $400 Million in Adani Share Offering
Abu Dhabi’s International Holding Co. will invest about $400 million in Adani Enterprises Ltd.’s follow-on share sale, voicing confidence in Indian billionaire Gautam Adani’s business empire after almost $70 billion was wiped off its market value.
The funding from IHC, which is controlled by a key member of the emirate’s royal family, will represent about 16% of the offering and follows an almost $2 billion investment in Adani’s companies last year.
“Our interest in Adani Group is driven by our confidence and belief in the fundamentals of Adani Enterprises,” Chief Executive Officer Syed Basar Shueb said. “We see a strong potential for growth from a long-term perspective and added value to our shareholders.”
IHC’s investment comes as Adani seeks to restore trust in his ports-to-power business following a scathing report by US-based short seller Hindenburg Research. The $2.5 billion share sale, scheduled to close Tuesday, was supposed to cement his legacy and open his empire to individual investors and broader India. Instead, he’s had to rely on funds from existing investors expressing their support.
Hindenburg accused the conglomerate of market manipulation, accounting fraud and operating a web of controlled offshore shell entities in tax havens. Adani Group issued a 413-page rebuttal on Sunday, but its efforts to restore confidence appear to be falling flat with many investors, as stock-market losses deepened and key dollar bonds sank to fresh lows.
While Adani Group bashed the allegations, the saga is reviving longstanding investor concerns about the conglomerate’s corporate governance. It also threatens to weaken broader confidence in India, until recently a top investment destination for Wall Street.
Still, IHC — which itself has struggled to entice international investors, some of whom privately expressed concerns about a lack of transparency — is standing by the businessman.
The move builds on an April investment in which Adani Enterprises raised 77 billion rupees ($944 million) by issuing preferential shares to IHC. Adani Green Energy Ltd. and Adani Transmission Ltd. also received 38.5 billion rupees from the Abu Dhabi-based firm.
Investors including Maybank Securities Pte, Abu Dhabi Investment Authority, State Bank of India Employees Pension Fund and Life Insurance Corp. of India also plan to buy stock in Adani’s share sale. Bloomberg News first reported IHC’s interest in the offering last week.
‘Based on Facts’
On Friday, in the wake of the Hindenburg report, IHC said its business decisions are based on facts and analysis. Shares in IHC fell as much as 5.2% on Monday, before erasing losses.
With investments ranging from Elon Musk’s SpaceX, to a local fishery and Abu Dhabi’s largest property developer, IHC is at the forefront of a drive to diversify the United Arab Emirates economy and deploy its oil windfall overseas.
“Since Adani is India’s premier airport and port operator, it might be in Abu Dhabi’s flagship investment firm’s interest to bolster the existing relationship, especially since the emirate is focusing a lot on tourism, ports, and other similar businesses,” said Vijay Valecha, chief investment officer at Century Financial, a UAE-based financial consulting firm. “These factors could have played a big role in compelling IHC to invest further in the Adani Group.”
IHC, whose market capitalization has rocketed to $239 billion since 2019, is controlled by the Royal Group, a conglomerate that lists Sheikh Tahnoon bin Zayed al Nahyan — the UAE’s national security adviser and brother to the president — as its chairman. The company hasn’t been included in the global MSCI index and isn’t covered by any stock analysts tracked by Bloomberg.
IHC is watching the international market closely for new prospects, and will continue exploring further opportunities outside its traditional market this year, CEO Shueb said in the statement on Monday. It will also explore business opportunities in Europe, Africa, Asia, and South America.
(Updates with analyst comment)
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