Adani Enterprises is launching a Rs. 20,000 crores FPO. The company will issue fresh shares to infuse equity capital into the business. The funds will help Adani Enterprises deleverage the balance sheet. The FPO is reserved for various investor categories in the following manner:
| Investor | Reservation | Discount [Rupees] |
|---|---|---|
| Institutional [QIB] | 50% | 0 |
| Non-Institutional [HNI] | 15% | 0 |
| Retail [IND] | 35% | 64 |
Check out this post for some more details picked up from the prospectus.
What is an FPO?
In an Initial Public Offering (IPO), a company offers its shares to the public for the first time. However, when an already listed company offers its shares to the public, the issue is called a Follow-on Public Offer (FPO).
Application & Call Payments for Retail Investors
All calculations assume the issue is subscribed at the upper price band [i.e. 3112 to 3276].
Discount - The retail category is eligible for a discount of Rs. 64 on application. Also, since this is a partly-paid issue, the entire payment for the share will not be collected upfront.
On application, 50% of the payment will be required, i.e. [50% of 3276 - Rs. 64 = Rs. 1574] and the remaining payment [Rs. 1638] will be called* for by the company at a later date. The total cost for a retail application, including the call amount, will come to Rs. 3212. Here is a schedule of payments applicable for each retail lot size:
| Lot size | Shares | Bid Price | Application Amount | Call Amount | Total Payment |
|---|---|---|---|---|---|
| 1 | 4 | 1574 | 6296 | 6552 | 12848 |
| 2 | 8 | 1574 | 12592 | 13104 | 25696 |
| 3 | 12 | 1574 | 18888 | 19656 | 38544 |
| 4 | 16 | 1574 | 25184 | 26208 | 51392 |
| 5 | 20 | 1574 | 31480 | 32760 | 64240 |
| 6 | 24 | 1574 | 37776 | 39312 | 77088 |
| 7 | 28 | 1574 | 44072 | 45864 | 89936 |
| 8 | 32 | 1574 | 50368 | 52416 | 102784 |
| 9 | 36 | 1574 | 56664 | 58968 | 115632 |
| 10 | 40 | 1574 | 62960 | 65520 | 128480 |
| 11 | 44 | 1574 | 69256 | 72072 | 141328 |
| 12 | 48 | 1574 | 75552 | 78624 | 154176 |
| 13 | 52 | 1574 | 81848 | 85176 | 167024 |
| 14 | 56 | 1574 | 88144 | 91728 | 179872 |
| 15 | 60 | 1574 | 94440 | 98280 | 192720 |
*The remaining payment can be asked for by the company in one or more subsequent calls.
Tentative Schedule of the Adani FPO
| Event | Timeline |
|---|---|
| Issue Period | 27th January to 31st January 2023 |
| Finalization of Allotment | 3rd February 2023 |
| Initiation of Refunds | 6th February 2023 |
| Credit of Shares | 7th February 2023 |
| Listing date | 8th February 2023 |
| Mandate end date | 15th February 2023 |
| Anchor Investors Lock-In End Date | 2nd March 2023 |
Will my average buy price be affected?
Your average buy price will be affected only if you apply for the issue and get an allotment. It will be calculated on FIFO basis.
If I hold Adani Enterprises (AEL), should I sell my holdings and apply for the FPO?
As of writing this post, the shares of AEL are trading at Rs. 3456.65 (i.e. higher than the FPO price). You can check out the live price & updates on Adani Enterprises in the below link:
Selling holdings and applying for the FPO seems like a simple arbitrage. However, you may not receive an allotment if the subscription is higher than the shares offered.
The risk involved in holding the shares is the possibility of prices falling, and the risk involved in selling them now is not receiving allotment and prices shooting up. Even if you are thinking about shorting AEL futures and applying for the FPO, you run the same risk of not getting an allotment and sitting on a naked derivative sell position.
In short, there is no simple answer. You might want to take a call on this trade based on your risk appetite.
How do I apply to the Adani Enterprises Limited FPO?
You can apply for the Adani Enterprises Limited FPO using any supported UPI app by following two steps:
- Enter your bid on Kite
- Accept the UPI mandate on your phone
On acceptance of the mandate, the bid amount will get blocked in your bank account. Click here to learn more.
