Asia’s richest man Gautam Adani took a break from his seemingly insatiable expansion spree expansion spree Business Standard Airports, roads, ports and now 5G: Adani group's expansion rolls on Read more in the past week but still made news all right.
The flagship of his sprawling, eponymous empire set the ball rolling on India’s largest-ever fundraise through a further public offering (FPO)—a process by which companies already listed on the stock exchange issue shares to the public.
The Rs 20,000 crore ($2.4 billion) fresh equity-issue plan announced by Adani Enterprises Ltd (AEL) on 25 November is a well-timed, strategic move to monetise the stock’s eye-popping rally over the past two-and-a-half years. An expected move (as The Ken had written written The Ken Gautam Adani’s oldest company is not his most valuable. But it dictates his future Read more in September).
AEL is the incubator in which most of the group’s new businesses, from airports and metals to petrochemicals and media, are housed. But it lacks big cash flows and relies heavily on debt to fund its dizzying array of new ventures through equity, loans, and guarantees.
To continue to be a magnanimous parent and, more importantly, to keep its leverage under control, AEL has to raise more equity.
It’s doing it now, at a time and price of its choosing.
The company has seen its shares surge a mind-boggling 30X since the start of the pandemic in 2020. Its market capitalisation now stands at Rs 4,45,000 crore ($54 billion), earning it a place in the benchmark Nifty 50 index. The stock’s valuations are in the stratosphere. From the company’s perspective, it’s a great time to sell.
It will also help AEL make a virtue—of broadening its investor base—out of a fundraising necessity.
In April 2021, The Ken reported reported The Ken Hype in the Adani Total Gas pipe Read more on the peculiar shareholding patterns in the Adani group companies, noting that several shared common foreign portfolio investors (FPIs). And strangely, several of them had negligible investments in non-Adani companies. As a result, the percentage of shares effectively available for trading by the public in the Adani stocks was very low. The Ken’s story set off a debate debate NDTV Adani CFO On Controversy Over Ownership, Investors Read more in mainstream media.