Adani FPO, the follow up public offer from the Asia’s richest man Gautam Adani, closes the books on its Rs 20,000 crore ($2.5 billion) follow-on public offer (FPO) today. Despite Adani Enterprises attracting investment from Abu Dhabi’s International Holding Co. with a $400 million ($3,200 crore) subscription, the FPO has so far only received a 6% subscription from investors, with the retail and non-institutional investor quotas underperforming.
The FPO committee is set to meet on February 1st to approve the offer price and prospectus. Will Adani Enterprises meet the 90% subscription threshold deemed necessary for success, or will the recent turbulence caused by Hindenburg Research cause further uncertainty for investors?
With a total offer size of 4,55,06,791 shares, the FPO has received bids for only 27,69,992 shares as of 10:15 am. The non-institutional investor quota has seen the highest subscription at 17%, while the employee and retail quotas have received 16% and 5% subscriptions respectively.
Tepid Response Amid Adani Group Shares Plunge
The lackluster response to the FPO can be attributed to the recent drop in Adani group shares. The Adani Enterprise’s shares have recovered for two consecutive days, but it continues to trade below the FPO price band of Rs 3,112-3,276 per share. The FPO committee is set to meet on February 1 for the approval of the offer price and prospectus.
Experts believe that institutional demand can make up for the shortfall in the retail and non-institutional investor categories. However, if the FPO does not reach at least 90% subscription, it will not be deemed successful. One alternative that the Adani group can consider is underwriting the FPO to cover the subscription shortfall, but this option comes with conditions imposed by the Securities and Exchange Board of India.
Adani FPO: Institutional Investors’ Role
Adani Enterprise’s Group CFO, Jugeshinder Singh, has stated that while retail investors are sensitive to share price, long-term institutional and strategic investors do not see any change in the value of Adani Enterprises following the recent decline. The Adani FPO‘s success will depend on the support of institutions and strategic investors.
Tuesday marks a crucial day for Asia’s richest man, Gautam Adani, as he closes the books on a $2.5 billion share sale amid allegations made by Hindenburg Research. Adani Enterprise’s shares have fallen 7% below the floor price set for the follow-on equity sale, causing some analysts to question the demand for the shares under the current terms. However, Adani hopes that the investment from IHC will restore trust in his business and attract more buyers on the last day of the offering.
Adani FPO: Final Thoughts
While investors in Indian public offerings often wait until the last day to place bids, other large follow-ons have seen higher subscriptions in the early days. For instance, Yes Bank’s $2 billion offering in July 2020 had a subscription rate of 24% on the first day, which increased to 53% on day two and reached 95% by the end of the offering.
Adani’s FPO has received bids from retail investors for 4% of the shares on offer, while employees have bid for 13% of the shares allocated to them. The non-institutional category, including wealthy individuals, has been subscribed to 5%, and qualified institutional investors have bid for an undisclosed amount. The pricing of the FPO will proceed as scheduled, and Adani Group CFO Jugeshinder Singh has stated that there will be no changes.
Shares of Adani Enterprises Ltd. have plunged about 7% below the floor price set for the follow-on equity sale owing to a broad three-day selloff that’s erased more than $68 billion of market value from Adani Group companies. Overall subscription for the offer, India’s largest follow-on equity sale, stood at just 3% as of end Monday.
That’s caused some analysts following the share sale to be skeptical about whether there will be enough demand under the current terms. Adani though will be hoping that the funding from Abu Dhabi’s International Holding Co. helps restore trust in his ports-to-cement business and lures buyers on the last day. IHC, which is controlled by a key member of the emirate’s royal family, said Monday it will invest about $400 million in the share sale.