Given company's track record, Adani FPO may be a good bet

The mega follow-on public offer (FPO) from Adani Enterprises Limited for Rs 20,000 crore would be opening from Friday (January 27) and closing on Tuesday (January 31). The price band is Rs 3,112 to 3,276 per share. Half the amount is payable on application and the balance would be in one or more calls. There is a discount of Rs 64 per share to be deducted upfront for retail investors.

This means that retail investors would pay Rs 1,574 per share when making an application in the FPO, which has a lot size of four shares. This is the largest FPO ever in Indian capital markets.

The company allotted 1,82,69,925 shares to 33 anchor investors at the top end of the price band of Rs 3,276 per share. They have all paid half the amount on application at Rs 1,638 per share.

The highest allocation has been made to Maybank Securities PTE Limited who was allotted 62,27,108 shares or 34.08 per cent of the anchor book. The domestic portion saw subscriptions from insurance companies like LIC, SBI and HDFC amongst others. There were no domestic mutual funds who were allotted shares.

Wednesday saw the release of a report on Adani Enterprises Limited and some of its group companies by Hindenburg, who is a US based investment firm that specialises in activist short selling. This firm has made various allegations against the company and the group and primarily alleged of overvaluation of its shares. The shares of the group companies were weak during the day, but recovered a substantial portion of the fall after the group rebutted the allegations.

Such allegations being made by a short seller on the eve of the FPO, who has positions in the market, has to be biased in his approach. Let's leave it at that and allow the markets to decide what reality is.

Adani Enterprises Limited as the company says is an 'incubator' and has over the years seeded many businesses for the group. The company has developed these businesses into sizable and self-sustaining business verticals and subsequently demerged them into independently listed and scalable platforms, thereby unlocking value for its shareholders. Some such examples are Adani Ports, Adani Power, Adani Transmission, Adani Green Energy, Adani Total Gas and Adani Wilmar.

The market capitalisation of the group as on December 31, 2022 was approximately $222 billion. The objects of the issue include funding capital expenditure to the tune of Rs 10,869 crore, repayment in full or part thereof of debts of Rs 4,165 crore and general corporate purposes of the balance amount.

The bulk of the capex would go to setting up a new solar module manufacturing plant, towards setting up a 'Nacelles' and 'Hubs' assembly and 'Rotor Blades' manufacturing facility and upgradation of existing crystalline silicon solar PV manufacturing unit.

Shares of Adani Enterprises Limited have had a dream run in the last 12 months on the bourses. The close as on January 31, 2022 was Rs 1,716. From there they rose all the way to Rs 4,190 in December 2022. The low during the period was Rs 1,530 in February 2022. On the day of the announcement of the price band of the FPO on January 18, the price was Rs 3,595. Since then, the share has shed Rs 193 or 5.36 per cent to close at Rs 3,402. A great deal of comfort for retail investors is lost in this price erosion in a share which has been highly volatile. The comfort however comes from the fact that the share is partly paid and just half the amount would have been paid on application. For the company to raise the balance amount, it is imperative that the market price of the share is way above the issue price or retail investors would just not pay up the call money. Considering the track record of the group and its delivery of building new sustainable businesses, investment may be made in the share.

(The author is the founder of

Kejriwal Research and Investment Services, an advisory firm)