Proxy advisory firm Institutional Investors Advisory Services (IiAS), in a voting advisory for Adani Green Energy, has recommended investors to vote against the company’s proposed Rs 9,350 crore preferential issue. IiAS said it does not support the choice of warrants over shares pre-purchased for the fund injection.
In December, Adani Green announced a preferential issue of warrants to its promoters for an amount of 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 via electronic voting between January 14 and 17.
An email query sent to Adani Green on Wednesday remained unanswered at the time of writing this story.
IiAS says in its report that they do not support the issuance of warrants to promoters, “as it allows them to track the share price for 18 months.” As part of the announcement in December, Adani Green said each warrant will be convertible into or exchangeable for one fully paid equity share of the company, exercisable in one or more tranches over a period of 18 months from the date of allotment. The minimum amount of Rs. 370.19 (per warrant), which corresponds to 25 percent of the issue price of the warrants, will be paid at the time of subscription and allotment of each warrant.
The IiAS voting recommendation added: “If the promoters subsequently decide not to subscribe to the remaining 75 percent, it could materially impact the company’s debt service/capex plans.”
The note encouraged the promoters of Adani Green to instead participate in a preferential equity issuance, “where the equity is raised upfront, rather than through the warrant route,” the note said.
The preferential issue is also crucial as it is part of Adani Green’s debt repayment plan. Earlier this week, Adani Green presented a repayment plan for its $750 million Holdco bond, which is due for repayment in September this year. Part of the repayment plan included $281 million as proceeds from the first tranche of the proposed preferential allocation to the promoter.
IiAS further said in its note: “While we understand that the company’s bonds, with a combined value of $750 million, will mature in September 2024, the need to inject funds in the form of warrants, rather than shares , unclear.”
Story so far
In December, announced promoters will invest Rs 9,350 crore in Adani Green
Invest through preferential issuance of warrants
The money will be used in part for a $750 million bond, due in September
At the EGM in January, shareholder approval will be requested for a preferential issue
IiAS recommends that shareholders vote against the choice of warrants over equity
First print: January 10, 2024 | 6:18 PM IST