Adani group’s U-turn in FPO explained

NEW DELHI: Gautam Adani's decision to cancel the largest FPO surprised many, but given yesterday's market volatility, the board felt strongly that proceeding with the FPO would be morally wrong. While announcing the cancellation, he stated that "the interest of my investors is paramount, and everything else is secondary." Why was Adani group’s FPO Called off? ET Now report explains it all.

Adani Enterprises FPO of Rs 20,000 crore, had given a price band between Rs 3,112 and Rs 3,276. It had already raised an amount of close to Rs 6,000 crore from Anchor investors and close to Rs 3,610 crore rupees from one of the bigger investors, that is IHC(International holding Holding Company). If you look at the subscriptions, you'll notice that the total FPO was subscribed 1.12 times, with the majority of the subscriptions coming from the NII portion, which is nearly 3.32 times oversubscribed.

However, the retail portion was very undersubscribed, just 0.12 times. The main reason why this FPO was called off was the sharp fall in the share prices of Adani Enterprises. It should be noted that the Hindenburg report was out on January 24th. If you see the share prices of Adani Enterprises, they are down nearly 38% and compared to the FPO price band of Rs 3,276. The current market price is nearly 33% lower, and to protect the interests of the investing community, Gautam Adani decided to call off the FPO of 20,000 crore rupees.

However, they stated that the reason for calling off the FPO was due to an unprecedented market and stock price fluctuations.

Now, why was this FPO done?
The green hydrogen business, the airport business, and the road project business are the three of these entities for which the company has now raised money for capital expenditures and debt repayment. According to analysts, these three key businesses account for the majority of Adani Enterprises' value.

If you look at Adani Groups, the entire Groups market capitalization has dropped from Rs 19.4 lakh crore to just Rs 11.8 lakh crore since January 24th. In September 2022, the peak market cap was close to Rs 23 lakh crore. So we have seen a sharp fall in the group's value over the period of time, and Gautam Adani who was once the second richest in the world is now the 13th richest. Gautam Adani has lost close to 48.5 billion US dollars in wealth in just one month of this calendar year.

Source: ET Now

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