Dubious distinction: AEL first to cancel share sale after full subscription

Adani Enterprises (AEL) on Wednesday became the largest company in India to withdraw its share sale. The company, however, joins 29 others to have withdrawn their initial public offering (IPO) or follow-on public offering (IPO) since 2003.

As per data provided by Prime Database, these 29 companies were targeting to raise a cumulative of Rs 11,000 crore. The reason for withdrawals in most cases is insufficient demand. AEL is the first company to withdraw its share sale, despite managing to garner full subscription. The reason being an unprecedented crash in its stock price, triggered by allegations of fraud and manipulation by US-based Hindenburg Research.

Shares of AEL on Thursday ended at Rs 1,567, just over half of Rs 3,276 –the price at which it had allotted shares to anchor investors.

“To insulate investors from potential losses we have withdrawn the FPO,” Gautam Adani, chairman, AEL has said. “After a fully subscribed FPO, yesterday’s decision of its withdrawal would have surprised many. But considering the volatility of the market seen yesterday, the board strongly felt that it would not be morally correct to proceed with the FPO,” he added.

Other high profile share sale withdrawals include one by Emaar MGF in February 2008. The real estate major’s Rs 5,436-crore IPO had garnered more than 80 per cent subscription but faced withdrawals due to a spike in market volatility amid the global financial crisis.

In 2012, Samvardhana Motherson Finance was forced to refund investors after pulling out its IPO due to the increase in market volatility, triggered by tightening of anti-tax avoidance rules known as GAAR.

More recently, state-owned telecom operator ITI had to withdraw its FPO as the share sale failed to garner full subscription, even after extending the closing date twice.