The year 2021 and 2022 belonged to the name Adani. They have been in the news for the series of acquisitions they have made and their entry into new sectors. Adani Group companies have seen an exponential increase in their stock prices when the world was dealing with the slow economy and other post-pandemic issues. Gautam Adani today is among the top 3 richest people in the world and as per reports, Adani Group is setting the stage for being more aggressive in their business strategies. The latest report from Adani Group is the upcoming FPO that is set to be among the biggest FPOs the country has ever seen. Discussed hereunder are the details of the same.
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Adani Enterprises FPO floor price and other details
Adani’s FPO will open for subscription on January 27th and close on the 31st, and the company will be issuing shares on a partly paid basis at a price band of Rs 3112 -Rs 3226 with a minimum lot size of 4 shares.
Anchor investors will get to bid for the issue on 25th January before the issue opens for the general public.
What is the Grey Market Premium(GMP) on Adani Enterprises FPO?
As per market observers, the GMP on Adani’s FPO is Rs 45 as on 27 Jan. It stood at Rs 100 on 25th Jan.
What is Adani FPO all about?
The Indian markets have seen very few FPOs as companies usually prefer to raise funds through QIPs or through IPOs. It is a quicker and hassle-free process that does not need more regulations. But the Adani Group has chosen the FPO route to meet its capital requirements and to meet many criticisms through a single move.
The meteoric growth of the Adani group stocks is a story of legends but this growth is often overshadowed by critics pointing out the tremendous increase in the debt levels of Adani Group companies.
Through this FPO, Adani Enterprises will be able to reduce the excessive leverage that has been accumulated through its multiple acquisitions in various sectors. In the papers filed with the SEBI, Adani’s have listed these uses for the funds raised through the Follow on public offer.
The Adani Group company will use the proceeds of the FPO for capital expenditure requirements and pay off some debt of its units.
- The company will use ₹10,869 crore out of the ₹20,000-crore to fund green hydrogen projects, airports facilities and greenfield expressways, the firm said in its latest prospectus.
- The company will also use ₹4,165 crore to repay the borrowings of three of its units, Adani Airport Holdings Ltd, Adani Road Transport Ltd, and Mundra Solar Ltd.
What is an FPO?
An FPO, Follow-On Public Offer, is similar to an IPOs but the key difference is that the former is an offer for public participation in already listed companies. This type of option can be used by companies to meet their capital needs at the same time attract increased public participation or investment in the company thereby getting access to higher funds at limited costs.
The current FPO will be for the flagship company of Adani Group, Adani Enterprises.
This company has acted as an incubator for various companies under the Adani Group name. The funds from the FPO will be trickled down to various group companies as per their financial plan for the next 3 to 5 years. It is also said that each of such companies is generating free cash flows and the current FPO will meet approximately 80% to 90% of their capital requirements during this period.
Increasing retail investors’ participation through FPO
Raising equity capital will also allow an increase in the retail investors’ participation which will address another concern that Adani Group Companies have minimum retail investors. The actual percentage of individual investors in Adani Enterprises is approximately 2.22% which is way less than its peers. By going the FPO route, Adani Enterprises is set to be at least better than its current position if not anywhere near to its peers like Tata Group or Reliance. The promoter holding in the company currently as per September 2022 reports stands at 72% approximately. An increase in the retail investors will also result in an increase in the free float of the company as well as improve the liquidity of shares.
Adani group had recently raised equity worth Rs. 7500 crores through UAE based company and now are aiming to generate funds by targeting pension funds, and sovereign wealth funds, in Canada and in UAE. Overall, Adani Group aims to raise approximately US$10 billion to meet its capital requirements over the next few years. The current FPO is part of the same plan. Furthermore, Adani Enterprises is also said to be in talks for raising Rs. 2000 crores through a maiden retail bond which is set to roll by December.
Most experts believe that the proposed FPO of Adani Enterprises will sail through without hiccups. This analysis is backed by the astronomical increase in the Adani Group stocks and the increased interest of the general public in these companies. Through the FPO, Adani Enterprises will be able to meet its capital requirements without any further personal investment or increase in debt levels which are already dangerously high.
Even with a discount at the current share prices, the Adani FPO may look expensive considering the stock has had a run-up of 138% between March and Dec 2022.
A. Adani Enterprises CAGR is approximately 26.4% in the past 3 years.
A. Raising funds through an FPO is a time-consuming process. It takes usually 2 months for SEBI to provide approval for the same after the necessary documents are submitted.
A. Till now, the biggest FPO in India to date belongs to the Yes bank FPO in 2020 which was to the tune of Rs. 15,000 crores. However, now with Adani’s Enterprise’s launch of Rs 20000 crore FPO, this will be the biggest FPO to date.
A. with the FPO, the promoter’s shares are diluted and there will be an increase in then retail participation or the retail investors. It will also result in an increase in the liquidity of the shares in the market.
Price of FPO is generally set at a lesser price than its current share price as it will encourage the general public to subscribe to the public issue.