How Adani Enterprises FPO cancellation will impact its airport, road and green hydrogen plans

Adani Enterprises Ltd (AEL), the battered Adani Group's incubator, had planned to deploy Rs 3,335 crore from its follow-on public offering (FPO) immediately in the last two months of current fiscal 2022-23, and Rs 7,535 crore over the next 14 months.

The current stock market sentiment toward Adani Group will now force the Ahmedabad headquartered Group to raise high-cost debt or scale back its ambitious expansion plans.

The FPO money was to come in two parts -- half of the money at the time of the application and later on calls spread over two years.

Late Wednesday night, AEL withdrew its Rs 20,000 crore FPO. The company has said that it will refund proceeds it had mobilised from institutional and HNI clients. There was not much retail investors interest though. 

The FPO money amounting to Rs 10,869 crore was supposed to be deployed in several projects of the green hydrogen ecosystem, improvement works of certain existing airport facilities like Ahmedabad Airport Project, and construction of greenfield expressway under its road and highway subsidiary.  

As per the company's disclosure to investors , there was also Rs 4,165 crore kept for repayment of loans. The borrowings related to subsidiaries like Adani Airport Holding Limited, Adani Road Transport Limited, and Mundra Solar Limited. "In case of borrowings from banks and insitutions, the company has to make some immediate arrangement if there is no roll back of loans," say sources.  

AEL, which acts like a holding company for the group, has incubated new businesses in capital guzzler sectors such as the green hydrogen ecosystem, solar, airports, roads and highways, data centres, defence and aerospace, and water. The company had actually planned to raise to fund for these new surnrise businesses.

Over the years, the flagship AEL has successfully incubated businesses like Adani Transmission, Adani Power, Adani Ports, Adani Green, Adani Total Gas and Adani Wilmar. These businesses are now independently listed in the market.  

The very fact that AEL was enjoying a high market valuation (current price to earning multiple of over 200 times) in the market was the future unlocking and listing in the next set of these new businesses. 

Post the short seller Hindenburg's report, the market price of AEL has been falling like nine pins. The stock has crashed from Rs 3,389 to Rs 1915 in the last eight trading days. 

Gautam Adani, chairman of the group, has said in a video statement that the FPO withdrawal will not have any impact on its existing operations and future plans. "We will continue to focus on timely execution and delivery of projects," he said while adding that the fundamentals of the company are strong.

"Our balance sheet is healthy and assets, robust. Our EBITDA levels and cash flows have been very strong and we have an impeccable track record of fulfilling our debt obligations," said Adani.

AEL has a market cap of Rs 56,200 crore. The company has a consolidated revenue of Rs 70,432 crore and a net profit of  Rs 787 crore in 2021-22.

The company is setting up an integrated green hydrogen ecosystem to offer low-cost renewable power and also produce low-cost green hydrogen. There are also plans to manufacture downstream products for the green hydrogen ecosystem.

Also Read: Citigroup’s wealth arm stops accepting Adani Group securities