IiAS recommends voting against Adani Green's Rs 9,350 cr preferential issue

Says issue of warrants instead of equity upfront allows promoters to ride the stock price for 18 months

Proxy advisory firm Institutional Investors Advisory Services ( IiAS ) has recommended investors to vote against Adani Green Energy’s proposed preferential issue worth Rs 9,350 crore, saying it does not support the choice of warrants instead of equity brought upfront for the fund infusion.

On December 26, during market hours, Adani Green announced a preferential issuance of 63.14 million of warrants to its promoters for Rs 9,350 crore at a per share price of Rs 1,480.75. The company is seeking shareholder approval for this proposal through an extraordinary general meeting (EGM) scheduled for January 18 and through e-voting between January 14 and January 17.

The company had said that the funds were to be utilised for deleveraging and accelerated growth capex in Adani Green to deliver 45 GW capacity by 2030. "This transaction follows successful debt raise of Rs USD 1.4 billion earlier in December 2023, and takes the total capital raised to $3 billion," it added.

An email query sent to Adani Green on Wednesday elicited no response at the time of filing this report. The Adani Green stock closed at Rs 1,599.90 on December 26, higher than the previous session's close of Rs 1,533.95. Since then, it has risen almost 8 per cent to close at Rs 1,722.95 on Wednesday on the BSE.

IiAS, in its report, said it does not support the issue of warrants to promoters because “it allows them to ride the stock price for 18 months.” As part of its announcement, Adani Green had said each warrant will be convertible into, or exchangeable for, one fully paid-up equity share of the company, which may be exercised in one or more tranches during 18 months commencing from the date of allotment. The minimum amount of Rs 370.19 (per warrant), which is equivalent to 25 per cent of the Warrants Issue Price shall be paid at the time of subscription and allotment of each warrant.

“Subsequently, if the promoters decide not to subscribe to the remaining 75 per cent, it could have material implications for the company’s debt repayment/capex plans,” the IiAS note added. It encouraged Adani Green promoters to instead participate in a preferential issue of equity, “where the equity is brought in upfront, rather than through the warrants route,” the note said.

The preferential issue is also crucial as it is part of Adani Green’s debt repayment plan. Earlier this week, the company presented a redemption plan for its $750 million Holdco bond up for repayment in September this year. Part of the redemption plan included $281 million as proceeds from the initial trance of the proposed promoter preferential allotment.

“While we understand that the company’s bonds aggregating USD 750 million are set to mature in September 2024, the need to infuse funds in the form of warrants, as against equity, is unclear,” the note said.

Story So far

• In December, announced promoters will invest Rs 9,350 crore in Adani Green
• Invest through preferential issue of warrants route
• Funds to be partially utilised for $750 million bond payable in September
• Seeking shareholder approval for preferential issue at EGM in January
• IiAS recommends shareholders to vote against the choice of warrants over and not upfront equity