Adani Enterprises shares drop 4% ahead of FPO. Is it time to buy the stock?

Adani Enterprises shares fell 4 per cent in Thurdsay’s trade. The Gautam Adani's flagship company is looking to raise Rs 20,000 crore from the FPO.

Adani Enterprises' shares crack 4% ahead of FPO; should you lap-up the stock?

Shares of Adani Enterprises fell over 4 per cent in Thursday’s trade after the company announced its mega follow-on public offering (FPO) at a discount to the prevailing stock price. The Gautam Adani's flagship company is looking to raise Rs 20,000 crore from the issue.

Adani Enterprises has fixed the price band for its FPO at Rs 3,112-3,276 apiece, with a lot size of 4 shares each with a face value of Re 1. One lot would cost Rs 13,104 to investors. Retail bidders will get a discount of Rs 64 per equity share during the bidding process, Adani Enterprises announced.

Following the development, shares of Adani Enterprises declined 4 per cent to Rs 3,446 level. The FPO price band was at a discount of 10 per cent to Adani Enterprises’ Wednesday’s closing of Rs 3,595.35. Shares of Adani Enterprises have fallen 18 per cent 52-week high of Rs 4,189.55 hit on December 21, 2022.

Incorporated in 1988, Adani Enterprises is the flagship Adani Group, led by Asia's richest person Gautam Adani. The Indian based conglomerate has a number of business ventures including coal mining, airport operations, defence, infrastructure, energy, cement, among others.

Despite offering shares at a discount, market participants remain positive on the Adani Enterprises. They believe the company is a consistent compounder and aggressive investors should bid for the issue.

“Global investors and FPIs apparently are much interested in the issue and are reportedly to contribute to a significant amount of the issue. Considering the business model and momentum, Adani Enterprises is at the sweet spot and will attract good interest from retailers as well,” said Kranthi Bathini, Equity Strategist at WealthMills Securities.

"Even in the last one year, Adani Enterprises has delivered mutlibagger returns to the investors, despite the volatility in the market. It is highly unlikely that the stock will breach its issue price in the listed market, making it a big support for the investors," Bathini said. "High risk appetite investors can bid for the issue considering the past performance."

Other than Adani Enterprises, Patanjali Foods (formerly known as Ruchi Soya Industries) raised Rs 4,300 crore via FPO in April 2022, whereas YES Bank mopped up Rs 15,000 crore from its secondary stake sale in July 2020.

Ventura Securities has updated its 24-month price target for Adani Enterprises to Rs 5,999, which suggests a potential 75 per cent from its Thursday's low. It said that the turbulence in the energy market due to the Russia-Ukraine war and climate change issues have necessitated a rapid switch to alternative clean fuel sources.

"Green H2 has the most potential and Adani has made rapid progress to harness that opportunity," said the brokerage firm. "Adani’s airport business growth is now on autopilot; the roads business is now on fast lane and that coal business is mining handsome profit."

The issue will run between January 27-31 and 50 per cent of it has been reserved for qualified Institutional bidders (QIBs). The quota for non-institutional investors (NIIs) and retail bidders has been fixed at 15 per cent and 35 per cent, respectively.

ICICI Securities, Jefferies India, SBI Capital Markets, Axis Capital, BOB Capital Makrets, IDBI Capital Markets, JM Financial, IIFL Securities, Monarch Networth Capital and Elara Capital (India) are the book-running lead managers to the issue. Link Intime India is the registrar to the issue.