Adani Enterprises' Rs 20,000-crore FPO likely before Budget 2023

Will be first to issue partly-paid up shares

Adani Enterprises Ltd (AEL), the flagship entity of the Adani group, is planning to launch its Rs 20,000-crore follow-on public offer (FPO) before the Union Budget on February 1, thanks to an encouraging response from global investors during the ongoing roadshows, sources in the know said.
 

The firm’s FPO will be the first to issue partly paid-up shares. Issuing such shares will allow AEL to raise Rs 20,000 crore in multiple tranches, they added.
 

The move is from the playbook used by Mukesh Ambani-led Reliance Industries (RIL) during its Rs 53,124-crore rights issue in 2020. RIL had collected only 25 per cent each in the first two tranches, and the balance 50 per cent in the final tranche over an 18-month period.
 

According to people in the know, AEL plans to collect Rs 20,000 crore in two tranches, and the initial tranche could be less than Rs 10,000 crore. 
 

 After the FPO, partly paid-up shares of AEL will be traded separately on the bourses and could trade at a premium to the fully paid-up shares.

“The exact size of the first trance will be finalised soon and will hinge on investor feedback from the roadshows. So far, the response has been strong from funds across geographies. The FPO will be rolled out ahead of the Union Budget,” said an investment banker handling the transaction.

A query sent to AEL remained unanswered.

AEL’s FPO will be done under the fast-track route, the framework for which was revised by the market regulator in 2020. Under this, a company having public shareholding of at least Rs 500 crore is exempted from preparing and filing the draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (Sebi). The move aims to improve the ease of doing business and reducing the time-frame for the completion of an FPO. Typically, preparing, filing and obtaining regulatory clearances for the DRHP can take several months.

At Rs 20,000 crore, AEL’s FPO will be the largest-ever in India, surpassing the record of YES Bank, which had raised Rs 15,000 crore in July 2020. However, YES Bank had raised the entire amount in one go.

The AEL share sale will be the group’s second fundraise from the public in a year. In January 2022, Adani Wilmar came out with a Rs 3,600-crore initial public offering. Shares of the FMCG firm have more than doubled since its listing. Shares of AEL, too, have doubled in the past one year even as they have corrected close to 10 per cent in the past one month.

Market experts said a key challenge in doing a mega FPO was managing volatility.

“Doing such a large FPO in two tranches is a sensible thing. Unlike an IPO, there is always an active secondary market reference price for an FPO. If the issue price comes too close to the secondary market price, investors, particularly retail, get discouraged from applying. Given the ongoing volatility, it is a challenge for the bankers and the issuer,” said an analyst.

AEL’s FPO will entirely be a fresh fund raise. The issue will help the Gautam Adani firm, part of the benchmark Nifty 50 index, achieve a more diversified investor base.