Adani FPO in the works to fund new-age businesses

Chairman Gautam Adani had said in September his group would invest $100 billion over the next decade, primarily in energy transition and digital opportunities.
Chairman Gautam Adani had said in September his group would invest $100 billion over the next decade, primarily in energy transition and digital opportunities.


The FPO plan also aligns with the Adani Group’s recent efforts to diversify its funding sources.

MUMBAI : Billionaire Gautam Adani’s flagship Adani Enterprises Ltd is planning a follow-on public offering (FPO) to finance the group’s expansion in green and digital businesses, three people aware of the development said. The board of the Adani-led firm will meet on Friday to finalize the fundraising.

Adani may raise 10,000-20,000 crore through the FPO, said one of the three people cited above, all of whom spoke on condition of anonymity. “The fundraising is aimed at two things. One, to mobilize funds for new businesses such as green hydrogen, data centres and renewables; and two, to improve the company’s float on stock exchanges by bringing in a wide set of new investors," the person said.

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In September, Adani, the second richest person in the world, said his group would invest $100 billion over the next decade, primarily in energy transition and digital opportunities, as well as sectors such as aerospace and defence, metals and petrochemicals. Of this, 70% is earmarked for energy transition. “It is our commitment to invest $70 billion in an integrated hydrogen-based value chain," Gautam Adani said while laying out his group’s plans.

Adani has mandated investment banks ICICI Securities and Jefferies to prepare the offer document, and more banks, perhaps including SBI Capital, will be on-boarded closer to the filing of the document, the second person said. “While things are at an early stage, the company is looking at launching the deal before the end of the fiscal if market conditions are conducive. Otherwise, this will get done in Q1 of next fiscal," he added.

The FPO plan also aligns with the group’s recent efforts to diversify its funding sources. Mint reported on 7 November that Adani Enterprises plans to raise as much as 2,000 crore through a maiden retail bond sale by December. Promoters currently hold 72% of Adani Enterprises, while public shareholding stands at 27.37%.

“An FPO makes more sense to them because they are also looking to improve the float. Compared to FPO, a qualified institutional placement (QIP) or a private placement would mean bringing in large institutional investors who would hold on to the stock for a longer term, while FPO will also bring in a wider set of investors such as high net worth individuals and retail investors into the stock, improving the float and price discovery of the stock," the first person added. FPOs also allow a free pricing mechanism as compared to QIP or private placement, which have a fixed formula to price the stock based on historical stock prices, he said.

An email sent to an Adani group spokesperson remained unanswered. However, a company executive, the third person cited earlier, said, “Adani Enterprises, the incubator in the conglomerate, has blueprinted a 3-5 year plan for fundraising. The current fundraising plan will cover 80-90% of equity funding requirements for the said period." Typically, Adani Enterprises plans its expansion both organically and through acquisitions over a 3-5 year period.

According to the executive, the Adani Group’s businesses generate a consolidated Ebitda of about 30,000 crore, of which 13,000 crore is used to service the group’s debt. Funding growth takes up the rest of the amount of 17,000 crore, he said.

As an incubator, Adani Enterprises will, over time, spin-off companies such as airports, data centres, green hydrogen and road projects. According to the Adani executive, each of these companies generates free cash flow.

The group has recently held road shows in top metros, explaining its businesses to investors. The healthcare vertical, for now, is a “not-for-profit" enterprise.

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