Adani Enterprises FPO anchor book oversubscribed. Issue to open on Friday. Should you consider?

Adani Enterprises has finalised anchor book for its forthcoming Rs 20,000 crore follow-on public offer (FPO), as per a Bloomberg report. The report suggested the issue was subscribed 1.8-2 times and that International Holding Co PJSC, Abu Dhabi Investment Authority, Mubadala Investment Co PJSC and BNP Paribas were among bidders. IHC, which invested nearly $2 billion in Adani group companies last year, was also looking to buy the largest chunk of around $200 million, the report said. Indian institutions including LIC and SBI Life also bade for the issue, the report suggested.

The Rs 20,000 crore FPO, which will be sold in Rs 3,112–3,276 price band, will open for subscription on January 27, Friday. It will conclude on January 31. The basis of allotment is likely by February 3, unblocking of funds is likely by February 4, credit of shares to demat account is likely by February 5 while the listing of the shares is likely by February 8.

Hindenburg report

Ahead of the biggest ever FPO, Adani group stocks were jolted on Wednesday by a report by short seller Hindenburg that claimed the Adani Group was engaged in “accounting fraud, stock manipulation and money laundering” over the course of decades. The report suggested that Adani group's seven listed companies have an 85 per cent downside potential on a fundamental basis due to sky-high valuations.

 Adani group, however, refuted the allegations and raised questions over the timing of the report’s publication.

The report, the Adani group claimed, had mala fide intention to undermine the group’s reputation with the principal objective of damaging the upcoming follow-on public offering from Adani Enterprises, the biggest FPO ever in India.

"The investor community has always reposed faith in the Adani Group on the basis of detailed analysis and reports prepared by financial experts and leading national and international credit rating agencies. Our informed and knowledgeable investors are not influenced by one-sided, motivated and unsubstantiated reports with vested interests," Jugeshinder Singh, Group CFO, Adani Group said.

IPO proceeds

As per Adani Enterprises, the issue will be utilised for funding capital expenditure requirements of some of the subsidiaries in relation to certain projects of the green hydrogen ecosystem. It would also be used for improvement works of certain existing airport facilities; and construction of greenfield expressway. Besides, the Adani group firm is looking to utilise the finds for repayment, in full or part, of certain borrowings and three of our subsidiaries, namely, Adani Airport Holding, Adani Road Transport, and Mundra Solar.

Assuming that the issue is subscribed, HDFC Institutional Equities noted that the stake of promoters in Adani Enterprises will fall to 68.94 per cent from 72.63 per cent at present. Public and employee holding in the company will increase to 31.06 per cent from 27.37 per cent at present.

Analyst take

Adani Enterprises, with its established business relations with coal suppliers of Indonesia, Australia and South Africa, has evolved as India’s largest importer of thermal coal catering to the requirement of both private and public sector undertaking (PSU) clients, said Asit C Mehta Investment Intermediates.

The company has businesses in 4 core sectors - energy and utility, transportation and logistics, consumer, and primary industry, it said.

"The company is going to manufacture end to end solution, which in turn brings no fluctuations in margins. With its continuous focus on becoming leading manufacturer of green hydrogen and increasing number of operating mines, we believe AEL is well placed to capitalise on domestic and international opportunities. On the financial performance front, over FY19-22, it has reported a 20 per cent CAGR growth in the topline. Hence, we recommend subscribing the issue from a long-term prospective," it said.

Girish Sodani, Head of Equity Market at Swastika Investmart said the FPO will be a good opportunity for retail investors to buy Adani Enterprises stocks at a discounted valuations since the company has done remarkably well in the past, entering into new businesses and expanding its business at a rapid pace.

"The same is shown in its results with September quarter profit more than doubling to Rs 460.94 crore while its revenues jumping 189 per cent YoY," he said.  

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