Adani Enterprises’ shares crack 4% ahead of FPO; should you lap-up the stock?

The share price of Adani Enterprises fell by more than 4%. Adani Enterprises, Gautam Adani’s principal business venture, is attempting to raise Rs 20,000 crore in the primary market.

After the specifics of Adani Enterprises’ mammoth follow-on public offering (FPO) were made public on Thursday, the company’s stock dropped by more than 4 percent during early trading. Adani Enterprises, Gautam Adani’s primary company, is attempting to raise Rs 20,000 crore in the primary market.

Each share in a lot of 4 would cost investors Rs 13,104, while Adani Enterprises has set the pricing band for its FPO at Rs 3112-3276. In the event of a public offering, the price of each equity share will be reduced by Rs 64 for retail bidders.

With news that Adani Enterprises plans to allot shares during the FPO at a discount of 10% from its previous price of Rs 3,595.35, the stock dropped more than 4% on Thursday, to a low of Rs 3,446. After reaching a 52-week high of Rs 4,189.55 on December 21, 2022, shares of Adani Enterprises have fallen 18%.

Adani Enterprises, founded in 1988, is the parent company of the Adani Group, which is headed by Asia’s wealthiest individual, Gautam Adani. The Indian conglomerate is involved in several different industries, such as coal mining, airport management, defense, infrastructure, energy, and cement, to name a few.

Despite providing shares at a considerable discount from its current market values, market participants remain upbeat on the Adani Enterprises. A believes that the company is a constant compounder and aggressive investors should bid for the issue, but others have boosted their long-term target price for the stock.’

Global investors and FPIs evidently are greatly interested in the offer and are reportedly to contribute to a considerable amount of the issue. Kranthi Bathini, an equity strategist at WealthMills Securities, has predicted that Adani Enterprises is poised for explosive growth because of the company’s promising business plan and momentum.

“Despite the uncertainty of the market, Adani Enterprises has continued to provide its shareholders with double-digit returns over the past year. It is exceedingly improbable that the stock will breach its issue price in the public market, making it a huge support for the investors,” Bathini added. “High risk appetite investors can bid for the issue considering the prior performance.”

 

Patanjali Foods, originally known as Ruchi Soya Industries, raised Rs 4,300 crore via FPO in April 2022, and Yes Bank scooped up Rs 15,000 crore from its secondary equity sale in July 2020. However, FPOs are not a common method of financing for publicly traded businesses.

In light of Thursday’s low, Ventura Securities has raised its 24-month price objective for Adani Enterprises to Rs 5,999, implying a possible 75% gain. A speedy transition to alternative clean fuel sources was deemed necessary, the report said, because of instability in the energy market caused by factors such as the conflict between Russia and Ukraine and global warming.

“Green H2 has the highest potential and Adani has made tremendous progress to harness that promise,” stated the trading firm. “Adani’s airport business growth is now on autopilot; the roads business is now on fast lane and that coal business is mining attractive profit.”

Half of the offering, which will be available from January 27-31, has been set aside for qualified institutional bidders (QIBs). Non-institutional investors (NIIs) have been allotted a 15% quota, while retail bids make up 35%.

Issue book-running lead managers are ICICI Securities, Jefferies India, SBI Capital Markets, Axis Capital, BOB Capital Makrets, IDBI Capital Markets, JM Financial, IIFL Securities, Monarch Networth Capital, and Elara Capital (India). Issue registration was handled by Link Intime India.