Adani Enterprises: Rs.20,000 Crore FPO – All you need to know

With a net worth of $126 billion, Gautam Adani just rose to third place in terms of wealth. The cornerstone of his multi-billion dollar Adani Group’s infrastructure business, the water segment, has now been announced as a new market for entry. It has developed its FPO, the second-largest FPO in India, worth Rs. 20,000 Crores. In the following article, you will find out about the FPO and who should invest.

A Brief About Adani Enterprises

The Adani Group includes this Indian Multinational Company, which operates several businesses. The promoters of the company are Gautam S. Adani and Rajesh S. Adani. Since its founding in 1988, the company has completed a significant number of projects. The company’s market value was Rs. 18,402 billion as on December 31, 2023.

The group operates many businesses, these include- 

  • Energy and utilities- data centers
  • Transportation and logistics- airports, roads, and 
  • FMCG Goods
  • primary industries- Mining services and resource management

The business concentrates its efforts on offering the highest caliber services and fostering a sustainable environment for the community.

Follow Up Public Offer

Before we go on analyzing the FPO, the following are the facts about the FPO. 

Objectives Of The FPO

The following goals will be funded with the help of the Net Proceeds from the FPO, according to the Company’s Prospectus – 

Financing capital expenditure needs of a few of the subsidiaries for-

  • certain projects involving the green hydrogen environment
  • renovations of a few already-existing airport facilities
  • the development of the Greenfield Expressway
  • Repayment of some borrowings by our company and three of its subsidiaries, Adani Airport Holding Limited, Adani Road Transport Limited, and Mundra Solar Limited, in full or in part.
  • Overarching business objectives.

Dates And Facts 

The business has proposed an FPO of Rs. 20,000 crores.

The FPO will start applications on January 27 and end on January 31, 2023, the day before the budget will be presented.

The promoters’ pre-issue stake is 72.63%. The shares are part of a partially paid arrangement, which is more suited and investor-friendly, which is another remarkable aspect.

Opening Date 27th January 2023
Closing Date 31st January 2023
Face Value Rs. 1 per share 
PriceRs. 3112 to Rs. 3276 per share 
Lot Size 4 shares 
Retail Discount Rs. 64 per share 
Retail Shares 35% of the Net Offer 
Listing PlatformBSE, NSE 
Listing Date 8 February 2023

Financials

Over a revenue of Rs. 44086 Crores, the company had a profit of Rs. 798 Crores in the FY20. The numbers for Turnover and Net Profits in FY21 were Rs. 764.32 and Rs. 40290 Crores, while for the year ending 2022, they were Rs. 70432 Crores and Rs. 475 Crores, respectively.

The company did experience the COVID-19 wave in FY21, but it’s Turnover and Profit statistics for the first half of FY2023, which were Rs. 79020 and Rs. 849 Crores, have demonstrated its future potential.

The business has been rewarding its current owners by paying them 100% dividends for the previous three fiscal years.

Additionally, they reported average earnings per share of 8.05 and a return on the net worth of 4.26% for the previous three fiscal years.

The asking price is at the Price-to-Earning of 231.52, indicating that the stock is fully priced. 

The Debt Controversy 

The business owes a staggering Rs. 26336 Crore in debt. Despite this large number, banks are happily extending loans to this company, in large part because of the company’s extensive physical assets, which include factories, plants, and ports that may all be mortgaged. The majority of the company’s customers are the government, which also supports these lending institutions morally.

According to the prospectus’s disclosure, the majority of these borrowings are long-term and must be repaid after more than five years. This amount can be borrowed for a long time without overwhelming the business. Additionally, the business will use a portion of the net proceeds of the offer to settle these debts.

Final FPO Review 

There are a few factors to take into account, such as the budget, which will undoubtedly affect the market.

Coal India and LIC had previously made offers that were as high as the 20,000 Crore offer from Adani. These amounts are 22,400 crores for Coal India and 21,000 crores for LIC. According to their prior performance, such huge offers have consistently led to a decline in the markets, draining the market’s liquidity.

The FIIs have been making net sellers in India and are moving to cheaper markets like China and South Korea. Making the chances slim for them to invest in this FPO.

About 7-8 months ago, the retailers were willing to invest in the market, but things aren’t looking as bright right now, with the appetite being low. The offer size is very high, making the allotment nearly certain, therefore if one currently owns a holding in the company, they can sell that and apply for this FPO. With the discount for the retailers, this can be a great opportunity.

Aside from this, the stock does not appear to be a suitable choice for short-term investors and may only be a great option for long-term investors.

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Navya

I am from a commerce background. I completed my Bachelor of Management Studies with a major in Finance from Delhi University in 2022. At present I am preparing for competitive exams and learning financial modelling. Besides, I have worked as an Equity Research Intern with an organization and as a Strategy Intern before that.

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