Adani Enterprises plans to raise as much as ₹20,000 crore via FPO

Billionaire Gautam Adani-led Adani Enterprises has unveiled a plan to raise capital via follow-on public offering (FPO), a method to raise funds by issuing additional equity shares after their initial public offering (IPO). The flagship firm of Asia’s richest person in an exchange filing on Tuesday said that its board will meet on November 25 to consider the proposal of raising funds by various modes, but it didn’t disclose details regarding the issue size.

“A meeting of the board of directors of Adani Enterprises will be held on Friday, 25th November 2022 at Ahmedabad, inter alia, to consider and approve the proposal of raising of funds by way of further public offering, preferential allotment (including a qualified institutions placement or through any other permissible mode) and/or combination thereof as may be considered appropriate, by way of issue of equity shares or any other eligible securities, subject to all such regulatory / statutory approvals as may be required including the approval of shareholders of the company,” the firm said in a late evening filing on Tuesday.

The company is reportedly in discussion with advisers on the offer and looks to issue at least $1.8 billion in new shares. The issue could go up to as much as $2.5 billion (₹20,000 crore).

The move is being seen as part of the company’s strategy to diversify its shareholder base and improve credibility among investors. As per the latest shareholding pattern available on the BSE, the Adani family holds 72.6% stake in Adani Enterprises, while foreign institutional investors (FIIs) and mutual funds own 15.6% and 1.3%, respectively.

Recently, research firm CreditSights, a part of Fitch Group, raised concerns about the Adani group's aggressive business expansion plan, which is predominantly funded with debt, resulting in elevated leverage and solvency ratios. The agency red flagged about the capital structure of Adani Group, controlled by the world’s third richest person, claiming that the conglomerate’s rapid business expansion was largely debt-funded, which could eventually spiral into a massive debt trap, and possibly culminate into a distressed situation or default of one or more group companies.

The report, which was released on August 23, mentioned that the Adani Group had pursued an aggressive expansion plan that pressured its credit metrics and cash flows. Over the past few years, the energy-to-FMCG conglomerate expanded aggressively through both organic and inorganic routes. This includes both rapidly growing operations of its existing businesses (for example, Adani Green is aiming at growing its operational renewable capacity almost five-fold by FY25), and entering into new sectors, in which it has no prior experience (including cement, copper refining, petrochemicals, data centres and most recently, media, telecom and alumina/aluminium production among others).

Meanwhile, shares of Adani Enterprises opened higher at ₹4,048.10, against the previous closing price of ₹4,035.60 on the BSE. During the first hour of trade so far, the stock gained as much as 0.6% to ₹4,060, while market capitalisation stood at ₹4.57 lakh crore. The stock has delivered a solid return of 134% in the past one year, while it rose 84% in the last six months. The largecap stock trades close to its 52-week high of ₹4,098.10 touched on November 16, 2022, while it hit a 52-week low of ₹1,529.55 on February 24, 2022.