Adani FPO serves to fund new age businesses

Adani can raise 10,000-20,000 crore through FPOs, said one of the three people cited above, all of whom spoke on condition of anonymity. “The objective of the fundraise is two things. One, to raise funds for new businesses such as green hydrogen, data centers and renewables; and two, to improve the float of the company on the stock exchanges by bringing in a wider set of new investors,” the person said .

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In September, Adani, the world’s second-richest man, 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. Explaining his group’s plans, Gautam Adani said, “We have a commitment to invest $70 billion in an integrated hydrogen-based value chain.”

The second person said that Adani has mandated investment banks ICICI Securities and Jefferies to prepare the offer document, and perhaps other banks, including SBI Capital, will come close to filing the document. “While things are at an early stage, the company is looking to launch the deal before the end of the financial year if market conditions are favourable. Otherwise, it will happen in the first quarter of the next financial year.”

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 the same amount 2,000 crore through the first retail bond sale by December. Promoters currently hold 72% of Adani Enterprises, while the public shareholding stands at 27.37%.

“An FPO makes more sense to them as they also want to improve float. Compared to an 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 period, while the FPO would also bring in a wider set of investors such as high net worth investors. Individuals and retail investors in stocks, float and improve stock price discovery,” added the first person. FPOs also allow a free pricing mechanism, compared to QIPs or private placements, which have to price based on the stock. There is a fixed formula for deciding historical stock prices, he said.

An email sent to Adani Group spokesperson did not elicit any response. However, a company executive, the third person cited earlier, said, “Adani Enterprises, the incubator in the group, has a 3-5 year plan for fundraising. The current fundraising plan is 80-90% for the said period.” Equity funding will cover the requirements.

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

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 conducted roadshows in top metros to showcase its business to investors. The healthcare vertical is, for now, a “not-for-profit” venture.

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