All you need to know about Rs 20,000 crore follow-on offer of Adani Enterprises

Over the last few decades, the Gautam Adani-led Adani Group has expanded into sectors as diverse as ports, airports, thermal power generation and distribution, renewable energy, fast-moving consumer goods, cement and water.

Now as it looks at the next phase of growth, the group’s flagship firm, Adani Enterprises, is embarking on what will be the country’s largest follow-on share sale. The company plans to raise up to Rs 20,000 crore, part of it to fund capital expenditure and part of it to repay debt at some of its existing businesses.

Adani Enterprises has set a price band of Rs 3,112 to Rs 3,276 for the share sale. At the upper end of the price band, the issue is at a 5.36 per cent discount to Thursday’s closing price, while at the lower-end it is a 10 per cent discount. Retail investors will get a Rs 64 discount per FPO equity share. The share closed at Rs 3,461.60 on the BSE on Thursday, down 3.7 per cent from its previous close.

The FPO will open for subscription on Friday, January 27, and close on Tuesday, January 31. Bids can be made for a minimum of four shares and in multiples of four shares thereafter.

Under the plan, Adani Enterprises will use Rs 10,869 crore to fund capital expenditure requirements of some of its subsidiaries in relation to green hydrogen projects, improvement works of certain existing airport facilities, and construction of greenfield expressway. It will also utilise Rs 4,165 crore out of the funds raised to repay its borrowings as well as borrowings of its subsidiaries – Adani Airport Holdings, Adani Road Transport and Mundra Solar. The remaining funds raised will be used for general corporate purposes.

Jugeshinder Singh, the CFO of Adani Group said the FPO would help bring in new shareholders in Adani Enterprises and it will also help increase the participation of normal Indian shareholders.

As of September 2022, promoters held 72.63 per cent stake in Adani Enterprises, while 27.37 per cent was held by the public. Among public shareholders, foreign portfolio investors held 15.59 per cent stake. Among domestic institutional investors, Life Insurance Corp of India (LIC) held 4.02 per cent stake.

Over the last few years, the Adani Group has set a scorching pace of growth. Not only has it grown existing businesses, but has also expanded into newer ones like cement, through the acquisition of Ambuja and ACC from Holcim, data centres and airports. Adani Enterprises shares have jumped over 1,428 per cent in just the last three years. Yet, it feels the best years are still ahead of it.

“We believe strongly that India’s best years are ahead of it. So, being a core sector portfolio of companies, we believe that what you are seeing up to today is development of the foundation. The best years for India and also for us are ahead of us,” said Singh.

One of the newer businesses that the group has entered in recent years is water. In 2018, Adani Enterprises had formed a new subsidiary, Adani Water, which would look at water and waste water businesses. This could well provide big opportunities for growth in the coming years for the company, which sees water as core element of infrastructure.

Last year, the Adani Group company Adani Data Networks also acquired 400 MHz of 5G spectrum. The move left many wondering if the company was planning a foray into telecom. The company had said then that the 5G spectrum would help create a unified digital platform that will accelerate the pace and scale of the Adani Group’s digitisation of its core infrastructure, primary industry and B2C business portfolio. Singh reiterated on Thursday that while it has ambitions in the digital space, it has no plans to enter the telecom sector.

Adani’s CFO Singh also tried to allay concerns related to the group’s debt. He said the group had enough cash and debt levels were comfortable.

“At the portfolio level is massively cash flow positive. The group has delivered in the past nine years. In 2013-14, our net debt to EBITDA (earnings before interest, taxes, depreciation and amortization) was 7.6 times at the portfolio level. Today, it is 3.2 times,” he said.