Adani Enterprises, the flagship firm of India’s most valuable conglomerate, is planning to launch a follow-on public offering (FPO) to raise ₹20,000 crore in fresh capital, a report by Business Standard stated. The board of Gautam Adani's firm will meet on Friday to approve the proposal.
If Adani Enterprises indeed decides to launch a ₹20,000-crore FPO, it will be the country’s biggest ever, the report pointed out.
Currently, Yes Bank holds the record for the largest-ever FPO, noted the report, adding that in July 2020, the lender had mopped up ₹15,000 crore via FPO to meet its capital requirements, however, the FPO managed to garner just 93 percent subscription.
The top 9 FPOs are by either lenders or public sector enterprises (PSU), according to the data provided by Prime Database. Baba Ramdev-led Patanjali Ayurved firm Ruchi Soya had launched a ₹4,300-crore FPO – the 10th biggest, earlier this year, it further informed.
However, it is important to note that FPOs are not a very popular avenue for raising funds for listed companies. India Inc prefers more flexible options such as qualified institutional placements (QIPs) given the low regulatory compliances, said the market daily.
"An FPO involves filing lengthy offer documents with market regulator Sebi. Further, obtaining a regulatory green light for an FPO can take two months. QIPs are relatively a fast-track way to raise capital," it explained.
Why FPO then?
According to the report, Adani Enterprises’ preference for an FPO could be driven by the objective of having a more diverse shareholding, said investment bankers. The group is often criticised for having concentrated shareholding.
The firm said that it is working on plans to increase [the] free float further. Doing a QIP would mean issuing shares to a fixed number of institutional investors, in comparison, an FPO requires participation from not just institutional investors but also retail, high net worth individuals and corporates, explained BS.
As on September 2022, the promoter shareholding in Adani Enterprises stood at 72.63 percent. Analysts, however, believe the “active” free float in the company is less than 27.37 percent. This is because over 15 percent of the public float is with investors such as LIC, Abu Dhabi-based International Holding Company, Elara, LTS Investment, APMS Investment, Vespera Fund and passive trackers (based on FTSE, MSCI and Nifty indices) which typically don’t sell actively in the market. Individual investors hold only about a 2.22 percent stake in Adani Enterprises.