Adani flagship plans up to $2.5 bn FPO after stock surges 26x in 5 yrs

Mumbai: Gautam Adani’s flagship, Adani Enterprises, has initiated its much-awaited follow-on public offer (FPO) to raise as much as 20,000 crore ($2.5 billion) from retail and institutional investors, riding on the meteoric 26-fold jump of its stock prices, said multiple persons in the know. The company has mandated Jefferies and ICICI Securities, the people cited said.

The company on Tuesday informed the stock exchanges that it will hold a board meeting on Friday in Ahmedabad, “to consider and approve the proposal of raising of funds by way of further public offering, preferential allotment (including a qualified institutional placement or through any other permissible mode) and/or combination thereof, as may be considered appropriate, by way of issue of equity shares or any other eligible securities, subject to all such regulatory / statutory approvals.”

The promoter holding in Adani Enterprises is currently 72.63%, according to BSE data.

The capital raise will boost the diversified business group as it grows aggressively across business verticals, both organically and via acquisitions.

An FPO will also increase the public float in the stock, which is somewhat less compared to similar-sized listed companies, such as Reliance Industries and Tata Consultancy Services (TCS). As on Tuesday, the market capitalisation of Adani Enterprises was Rs 4.6 lakh crore.

More banks are expected to join the offering, but Jefferies and ICICI Securities have sounded out some institutional investors to gauge their mood. More clarity on the quantum and timeline is expected to emerge by next month, though sources expect the issuance to hit the capital markets this financial year, unless a public market meltdown forces a pull-out.

Mails sent to Adani Enterprises did not generate a response till press time.

Among public investors, FIIs own 15.59% of the company, while the public and mutual fund shareholding is only 6.46% and 1.27%, data showed. The foreign institutional investors’ (FIIs) holding has come down from March 2021, when it was 20.51%. In May 2022, the mutual fund holding too was at the highest, at 2%.

Promoter holding has also fallen from its historic highs of 74.92% (December 2020-March 2022). Among domestic investors, LIC held the largest chunk, of 4%.

On September 29, Financial Times was the first to report that Adani is planning to tap the equity markets and raise a public float.

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Adani Enterprises was listed in 1994. Currently, it is the group’s holding company across its swathe of infrastructure businesses — airports, ports, mining, agriculture, data centres, defence, cement, agriculture and warehousing.

“Most of the businesses it incubates are capital intensive, like data centres, railways, mining or even airports. But several global investors are wary of its coal exposure and have stayed away due to ESG (environmental, social and governance) concerns,” said an old Adani watcher, who did not wish to be identified. “It’s best if they demerge each of these businesses as they scale up.”

However, some market watchers have baulked at the debt-fuelled expansion of the conglomerate and the lack of broader coverage by equity research analysts.

Recently, Adani contested a Fitch Group firm, CreditSights, that called the group “deeply over-leveraged,” pegging the conglomerate’s total debt at $28.80 billion. Adani challenged the figure and, subsequently, the ratings and research company softened the tone of its observations but stuck to its main conclusion that billionaire Gautam Adani’s empire has too much debt. However, equity markets have rewarded the group’s stocks, with several among the top performers in the broader Indian market this year.