Adani Enterprises shares on Thursday fell more than 2% to Rs 3,501 on NSE, a day after the Adani group company announced the floor price for its follow-on public offer (FPO) to raise up to Rs 20,000 crore. Adani Enterprises FPO is the largest for the Indian markets In which Adani will sell shares in the company which has almost doubled market value over the past one year. Adani Enterprises has decided on a floor price of Rs 3,112 per equity share for the FPO which opens on 27 January. The cap price of the offer has been fixed at Rs 3,276 per share for all categories of investors. The company has also approved a discount of Rs 64 per share in the FPO for retail investors bidding in the retail portion of the offer. The minimum bid lot will be of four shares (in multiples of four shares thereafter). The subscription for FPO will close on January 31, 2023.
Adani Enterprises FPO lot size, other details
According to the RHP, shares aggregating up to Rs 50 crore are reserved for bidding in the FPO by eligible employees, not exceeding 5% of the post-offer paid-up equity share capital. Not less than 35% of the shares are reserved for retail investors. Shares will be allotted to demat accounts of the allottees by 7 February, and they can be traded from 8 February.
Adani Enterprises shares offered at a discount in FPO; should investors buy?
One lot of Adani Enterprises shares in the FPO will cost Rs 13,104 at the upper end of the price band. At the lower end of the band, the shares in FPO are being offered at a discount of 13.44% when compared to Wednesday’s closing price of Rs 3,595.35 a share on BSE. “From retail investors’ perspective, it will be a good opportunity to buy stocks in the FPO at a discounted valuation since the stock has done remarkably well in past, entering into new businesses and expanding its business at a rapid pace. The same is shown in results also as of Sep 22 quarter, company’s net profit more than doubled to Rs 460.94 crore, compared with Rs 212 crore, and its revenue from operations jumped 189%. (compare from last year),” Girish Sodani, Head of Equity Market at Swastika Investmart said.
What is an FPO?
For the uninitiated, FPO is an additional share sale offer while an IPO or initial public offering is the first sale of shares of a company. FPOs are generally considered an advantage over IPOs because investors get an idea about the company stock, result performances, business practices, and growth projections. Additionally, investors are also very familiar with the stock and its price range. FPOs are done by already listed companies to diversify their equity shareholding. The previous largest FPO was a Rs 15,000 crore share sale in 2020 by Yes Bank.
FPO proceeds to be used for debt repayment, general corporate purposes
In the RHP, Adani Enterprises stated that it plans to use the proceeds for the FPO to meet capital expenditure requirements, repay debt owed by the company and three subsidiaries, and for general corporate purposes. Of the Rs 20,000 crore proceeds of the FPO, Rs 10,869 crore will be used for green hydrogen projects, work at the existing airports, and construction of a greenfield expressway, while Rs 4,165 crore will be used to repay borrowings of Adani Airport Holdings, Adani Road Transport, and Mundra Solar, it said.
Adani Enterprises shares’ stellar performance
Adani Enterprises shares settled 1.20% lower at Rs 3,595.35 apiece on the BSE on Wednesday. In the last one year, the stock has outperformed the benchmark indices as it nearly doubled from Rs 1,828 in January 2022 to Rs 3,584.9 on Wednesday, 19 January 2023. Benchmark Nifty 50, on the other hand, witnessed volatility during the year, but stayed flat after a year from 17,617 levels in January 2022 to 18,165 on Wednesday. Adani Enterprises is trading at a valuation of over 141 times its one-year forward earnings. To put it into perspective, Reliance Industries Ltd, India’s largest firm by market valuation, in comparison is at about 20 times, according to the data compiled by Bloomberg.
(The stock recommendation in this story is by the respective research analyst and brokerage firm. FinancialExpress.com does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)