India’s largest follow-on public offer (FPO) for Rs 20,000 crore, by Adani Enterprises, opens for subscription today (January 27).
The floor price of the issue is Rs 3,112 per share of Re one face value, making it one of the more expensive share offerings in the capital market so far. What is an FPO?A follow-on-public offer (FPO), also known as secondary offering, is a process in which an existing company listed on stock exchanges issues new shares to the existing shareholders as well as new investors. What will the proceeds be used for? As the ports-to-energy conglomerate is looking to foray into new areas, it is planning to use the proceeds of this fund-raise for capital expenditure in certain ventures and also to repay the debt of some of its businesses.
Capital Expenditure: Of the total fund raised from the FPO, the company has proposed to invest Rs 10,869 crore in capital expenditure for green hydrogen systems, airports, and for construction of a greenfield expressway. Last year, Adani had said his group would invest over $70 billion in the energy transition space. Debt repayment: The Gautam Adani-led company plans to utilise another Rs 4,165 crore for repayment of loans availed by its subsidiaries, Adani Airport Holdings Ltd, Adani Road Transport Ltd, and Mundra Solar Ltd.
What is the FPO price band? The company has fixed the floor price of the FPO at Rs 3,112 per equity share, a 13% discount from last Wednesday’s closing price of Rs 3,595.35 apiece on BSE. The price band of the issue has been set at Rs 3,112-3,276 per share. On the following Thursday, the company’s scrip, which shot up by 126 % in the last year, fell 3.72% at Rs 3,461.6 on the BSE, facing selling pressure from investors who were worried over the high pricing of the FPO.