Offer garners just 1% subscription on opening day, with bids worth just Rs 150 cr vs Rs 14,908 cr on offer
The battering taken by the shares of Adani Enterprises (AEL) has raised dark clouds over the firm’s Rs 20,000-crore follow-on public offering (FPO). The share sale on the first day garnered just one per cent subscription, attracting bids worth just Rs 150 crore as against Rs 14,908 crore on offer, data provided by stock exchanges showed.
The shares of AEL crashed 18.3 per cent on Friday to end at Rs 2,769. The stock now is available at an 11-15.5 per cent discount to the FPO price band of Rs 3,112-3,276 a share.
“Even if one applies a Rs 64 discount applicable for retail investors, the stock is available 9 per cent cheaper. If the stock fails to recover over the next two days, the FPO will struggle to garner adequate subscription. Why would an investor buy the stock expensive in the FPO when it is available cheaper in the secondary market? There have to be some gains on the table to entice investors,” said an analyst.
When AEL set the price band for its FPO on January 18, the secondary market price was more than 10 per cent higher. The carnage in the group stocks has been triggered by a controversial report by Hindenburg Research, where it has made accusations of market manipulation and accounting fraud.
AEL’s FPO closes on Tuesday. The company has already received commitments for Rs 5,985 crore from anchor investors.
In the FPO, Maybank Securities alone subscribed for over a third of shares worth ~2,040 crore. ELM Park Fund, Winro Commercial, Belgrave Investment Fund and Dovetail India Fund Class were the other big investors subscribing to shares worth over ~300 crore each. Among domestic institutions, LIC subscribed to shares worth nearly ~300 crore, while SBI Life Insurance got allotment for ~125 crore worth of shares and SBI Employees Pension Fund another ~100 crore. Notably, domestic mutual funds (MFs) have so far abstained.
In the FPO, AEL is issuing partly paid up shares. It will collect 50 per cent or ~1,638 per share from investors in the first tranche. And the remaining 50 per cent in one or more tranches over an 18-month period.
“Since the FPO will have one or more call options, it is necessary that the stock stays above the FPO price or the company will risk non-payment by investors if it goes out-of-the-money,” explained the analyst quoted earlier.
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