Adani Power’s Proposal to Go Private by Delisting, SEBI Scrutinises

Adani Power Ltd. (APL)’s proposal to delist its shares from stock exchanges is currently under the scrutiny of the Securities and Exchange Board of India (SEBI). This news comes after the company announced its buyback price last year, approximately 65% less than its publicly traded value.

Adani Group claims the deal to be beneficial for its shareholders. However, it keeps postponing its proposed buyback’s date as the capital markets regulator continues to hold back its approval as it closely examines the plan.

All You Need to Know about Adani Power’s Delisting Proposal

A subsidiary of the Adani Group, Adani Power Ltd. is India’s leading private thermal power producer. It has its headquarters at Gujarat’s Ahmedabad and operates across six Indian states with a 12,450 MW capacity.

Here are a few insights into the company’s recent developments –

• In the June quarter of 2021, Adani Power reported a net profit of Rs. 278 crores.
• The company’s stock price saw a sharp decline from Rs. 155.8 on 10 June this year to Rs. 90.00 on this Monday, i.e., 9 August 2021.
• At the same time, BSE recorded a remarkable rise in the number of APL’s public shareholders that increased from 334,000 last June to 981,000 in June this year.

This surge in the number of public shareholders of the company came soon after Adani Power announced its decision to delist shares worth Rs. 3,264 crores in June last year. APL’s promoter, Adani Properties, proposed to buy the former’s shares at a floor price of Rs. 33.82 apiece. As of June 2020, Adani Power’s promoter group collectively held 74.97% of APL’s paid-up equity share capital.

Why Did Adani Power Come to This Decision?

APL issued an official statement last year disclosing its objectives behind the proposed delisting as follows –

• Let Adani Properties gain total ownership of Adani Power.
• Improve APL’s strategic, operational, and financial flexibility.

Adani Power board approved this decision in the same month of its declaration, while the shareholders’ approval came in the following month.

In light of the sharp plunge in stock valuation, delisting can be seen as an affordable means for company promoters to enhance their stake. However, investors are left in a dilemma as to how this decision will affect their investments.

SEBI’s Reasons for Withholding The Delisting Approval

Adani Group has already been under SEBI’s probe since last month due to its alleged non-compliance with security laws. In addition, junior finance minister Pankaj Chaudhary disclosed in Parliament that the credibility of specific foreign portfolio investors in certain group companies is also questionable.

These allegations following the news of delisting have impelled several shareholders to drop their investments. However, others continue to hold on to their units hoping for the conglomerate to come out clear of SEBI’s probe.

Adani Power has not received any response from SEBI and might not do so until the probe ends.

Some of the other factors adding to the delay in SEBI’s approval are as follows –

• According to a spokesperson, the detailed scrutiny might be due to the unusual movement of stock prices.
• At the same time, there are doubts about why APL chose to value itself so much lower than its current market value.
• SEBI also thinks APL’s delisting price might no more be relevant since the Adani power board zeroed in on it last year. This is despite the fact that the floor price was calculated according to the SEBI formula.

These are some of the concerns SEBI might weigh in before approving this proposal. However, the authorities have not provided any sure indication in favour of the delisting.

Bottom Line

SEBI’s Adani Power’s delisting proposal might take a considerable time as it has been over a year since its board approved the proposal and the buyback price. However, if approved, the delisting might prove to be highly disadvantageous for retail investors who entered the stock at a high valuation. Considering these consequences, there is very little possibility of any investor willing to sell their units at nearly one-third of their value.

 

Frequently Asked Questions

1. What type of delisting is Adani Power aiming to carry out?

Adani Power Ltd. has proposed a voluntary delisting of its shares.

2. Who is the founder of the Adani Group?

Gautam Adani is the owner of the Adani Group.

3. Which stock exchanges have Adani Power proposed to delist from?

Adani Power has proposed delisting of its equity shares from the NSE and BSE.