Shares of Adani Enterprises decline 2% as company sets Rs 20,000 cr. FPO cost range
Thursday saw a more than 2.5% decline in the share price of Adani Enterprises after the company released information on its Rs 20,000 crore FPO. The stock was the largest Nifty loser.
Following the announcement of the floor price for its follow-on public offering (FPO) to fund up to Rs 20,000 crore, Adani Enterprises shares dropped more than 2% to Rs 3,501 on Thursday on the NSE. The largest FPO for the Indian markets will be conducted by Adani Enterprises, in which the company would sell its shares after seeing its market value nearly double in the previous year. The floor price for the FPO, which begins on January 27, has been set by Adani Enterprises at Rs 3,112 per equity share.
For all types of investors, the cap price of the offer has been set at Rs 3,276 per share. For retail investors who are submitting bids for the retail portion of the offer, the corporation has additionally allowed a discount of Rs 64 per share in the FPO. There will be a minimum bid lot of four shares (in multiples of four shares thereafter). The deadline for FPO subscriptions is January 31, 2023.
Size of Adani Enterprises’ FPO lot and other information
The RHP states that shares totaling up to Rs 50 crore, or 5% of the post-offer paid-up equity share capital, are set aside for qualified workers to bid on in the FPO. A minimum of 35% of the shares must be available to retail investors. By 7 February, shares will be allocated to the allottees’ demat accounts, and they can start trading on 8 February.
Should investors purchase the discounted Adani Enterprises shares offered in FPO?
The maximum price for one lot of Adani Enterprises shares in the FPO is Rs 13,104. The shares of FPO are being sold at a discount of 13.44% at the lower end of the pricing range compared to Wednesday’s BSE closing price of Rs 3,595.35 per share. Since the stock has performed amazingly well in the past, expanding into new businesses and doing so quickly, it will be an excellent opportunity for retail investors to buy shares of the FPO at a discounted valuation.
The same is evident in the statistics as of the Sep 22 quarter, when the company’s net profit more than quadrupled to Rs 460.94 crore from Rs 212 crore and its operating income increased by 189%. (in comparison to previous year),” said Girish Sodani, Swastika Investmart’s Head of Equity Market.
An FPO definition
For the uninitiated, an FPO is an additional share sale offer, whereas an IPO, or initial public offering, is the first-time shares of a firm are sold. Because investors learn more about the company stock, financial results, operational procedures, and growth expectations, FPOs are typically seen as preferable to IPOs. Investors are moreover highly familiar with the stock and its price range. Already listed firms engage in FPOs to diversify their equity shareholding. The last biggest FPO was a share sale by Yes Bank in 2020 for Rs 15,000 crore.
FPO profits will be applied to company general purposes and debt reduction.
The revenues from the FPO will be used by Adani Enterprises to meet capital expenditure needs, pay off debt owed by the firm and three subsidiaries, and for general corporate objectives, according to the RHP. According to the statement, out of the 20,000 crore rupees in proceeds from the FPO, Rs 10,869 crore will be used for green hydrogen projects, improvements at the current airports, and the building of a greenfield motorway, while Rs 4,165 crore will be used to pay off debts owed by Adani Airport Holdings, Adani Road Transport, and Mundra Solar.
The outstanding performance of Adani Enterprises shares
On the BSE on Wednesday, shares of Adani Enterprises ended 1.20% lower at Rs 3,595.35 a share. The stock beat the benchmark indices in the previous year, nearly doubling from Rs 1,828 in January 2022 to Rs 3,584.9 on January 19, 2023. On the other hand, the benchmark Nifty 50 saw volatility during the year but remained unchanged from 17,617 levels in January 2022 to 18,165 on Wednesday.
Adani Enterprises is valued at more than 141 times its projected annual earnings. According to data gathered by Bloomberg, Reliance Industries Ltd., India’s largest company by market valuation, is at a distance of nearly 20 times.