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Tuesday, February 27, 2024

Retail investors need to understand why Adani is raising Rs. 20K crores

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Adani Enterprises’ FPO will open for subscription on January 27. Anchor Investors can bid on Adani Enterprises’ FPO until January 25, 2023. A follow-on public offer (FPO) is a method of acquiring funds for a company.

Adani Enterprises has launched the largest follow-on public offering in India (FPO). This FPO will go on sale for Rs 20,000 crore on January 27. The issue’s floor price is Rs 3,112 per share, making it one of the most expensive shares in the capital market thus far.

The term “secondary offering” refers to a follow-on-public offer (FPO). It is the procedure through which a publicly traded corporation issues additional shares to both current shareholders and new investors. The proceeds from the FPO that Adani Enterprises is bringing this month will be used in a variety of areas.

The corporation, which operates in industries ranging from ports to energy, intends to expand into new markets. The business has planned to invest Rs 10,869 crore in capital expenditure from the entire cash obtained through the FPO for the construction of green hydrogen systems, airports, and greenfield motorways.

Adani Group Chairman Gautam Adani stated last year that his company will invest more than $70 billion in the energy transition industry.

Besides that, Adani Enterprises would utilise the proceeds from the FPO to repay the debt. The business, founded by Gautam Adani, intends to utilise Rs 4,165 crore to repay debts incurred by its subsidiaries Adani Airport Holdings Ltd, Adani Road Transport Ltd, and Mundra Solar Ltd.

The business stated in an exchange filing that the minimum bid for the FPO is four shares, followed by four shares in multiples of four.

What exactly is an FPO Price Band?

The business has set the FPO floor price at Rs 3,112 per equity share, which is 13% lower than the BSE’s closing price of Rs 3,595.35 on Wednesday. The issue’s price band has been set at Rs 3,112-3,276 per share.

On the BSE on Thursday, the company’s shares slid 3.72% to Rs 3,461.6.  The reason for this is the growing worry of FPO’s high-priced investors, which is putting pressure on the stock.

Adani Enterprises’ share price has dropped by more than 7% in the previous five trading sessions. This stock has dropped by more than 16% in the previous month.

According to market analysts, the stock has decreased because the FPO will be sold at a discount to its present trading price. Because FPO is enormous in size. As a result, top brokerage firms believe that the FPO will be fully subscribed despite the dismal secondary market circumstances. The rationale for this is the previous returns earned by investors.

However, if the market price falls, the investor reaction to the FPO may suffer. Retail investors would receive a markdown of Rs 64 per share from the corporation. This is only 2.05 percent of the share’s floor price of Rs 3,112 per share.

According to Adani Enterprises’ Chief Financial Officer Jugeshinder Singh, “it is critical for us that every Indian be able to join in the money-making tale. One method is to encourage involvement in the equity markets. We want to contact as many retail investors as possible. “

In April 2020, the share price of Adani Enterprises was Rs 134. This stock’s price has surpassed Rs 4,100 by December 2022. Retail investors, according to market gurus, should avoid this issue since it is already overvalued. Yes, if individuals are serious about investing, they can contribute a tiny sum into this cause.In general, investors should wait for the company’s goals to come to fruition. The stock is traded on exchanges, and investors can purchase it at any time.

Following the FPO, the company’s capital basis is poised for expansion. This may have an impact on the market price following the incident. However, the company’s performance in the future quarters will be crucial. According to the red herring prospectus filed with the BSE, the business has total borrowings on Adani Enterprises of Rs 40,023.50 crore as of September 30, 2022.

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