Adani Enterprises FPO GMP (Grey Market Premium)

Adani Enterprises FPO, worth Rs. 20,000 crore comprises entirely of a fresh issue of the said amount. There is no offer for sale (OFS) component in this FPO. Hence the entire amount of the FPO (adjusted for issue costs) will come into the company as funds infusion. Here it must be noted that while the fresh issue component infuses fresh funds into the company, it also is EPS dilutive and equity dilutive. On the other hand, the OFS is just a transfer of shares so there is no fresh infusion of funds, but it also does not dilute the equity. The FPO has been priced in the band of Rs. 3,112 to Rs. 3,276 per share and the FPO allotment price will be discovered post the book building of shares being completed during the FPO process. There is an additional discount of Rs. 64 per share for retail investors.

The issue opens for subscription on 27th January 2023 and closes for subscription on 31st January 2023 (both days inclusive). The basis of allotment will be finalized on 03rd February 2023 and the refunds will be initiated on 06th February 2023. In addition, the demat credits are expected to happen on 07th February 2023 and the stock is scheduled to list on 08th February 2023 on the NSE and the BSE. The grey market price (GMP) trading normally starts about 4-5 days prior to FPO opening and continues till the listing date. In the case of Adani Enterprises Ltd, we already have GMP data for the last 7 days, which should give a reasonable picture of the likely listing performance.

There are 2 factors that impact the GMP. Firstly, the market conditions have a deep impact on the GMP, which includes the levels of the Nifty and Sensex as well as the general FPO market and macro conditions. Secondly, the extent of subscription for the FPO across the retail and the QIB segments also has a deep impact on the GMP as it is indicative of investor interest in the stock. Generally, strong QIB subscription is a trigger for a spike in GMP. The QIB allocation in the current FPO of Adani Enterprises if 50% while the retail portion gets 35% allocation and HNI / NII get 15% allocation.

There is one small point to remember here. The GMP is not an official price point, just a popular informal price point. However, in most cases, it has been observed to be a good informal gauge of demand and supply for the FPO. Hence it does give a broad idea of how the listing is likely to be and how the post-listing performance of the stock would be.

GMP tends to be a good mirror of the real stock story. More than the actual price, it is the GMP trend over time that gives insights about which direction the wind is blowing. Here is the Adani Enterprises FPO GMP summary data is available.

In the above case, the GMP trend shows that the grey market premium has opened at around Rs. 78, but has since oscillated between the levels of Rs. 0 and Rs. -12 in the last 7 days. However, after a dip, the grey market price (GMP) has bounced back sharply. Of course, we have to await for the actual subscription numbers to flow in when the issue opens for subscription on 27th January 2023, as that would have a very significant impact on the GMP. In the past, stocks which got oversubscribed in the FPO also saw a very robust positive shift in the grey market pricing. For a start, Adani Enterprises Ltd has shown good traction in the grey market.

If you consider the upper end of the price band of Adani Enterprises Ltd at Rs. 3,276 as the indicative price, then the likely listing price is being signalled at around Rs. 3,350 per share based on the GMP indicator on 25th January 2023. One data point to track will be the subscription update on the stock as that would chart the GMP course from here. As mentioned, the institutional QIB subscription is a key trigger for the GMP pricing.

The GMP of Rs.74 on a likely upper band pricing of Rs. 3,276 indicates a likely listing premium of 2.26% for Adani Enterprises Ltd over the listing price. That pre-supposes a listing price of approximately Rs.3,350 per share, when Adani Enterprises Ltd lists on 08th February 2023. Of course, these are approximations, so you must keep a margin of safety. However, that would depend on the GMP sustaining over the next few days after the issue opens.

GMP (grey market price) is an important indicator, albeit informal, of likely listing price. One cannot take this price at face value However, the GMP tends to be quite dynamic and changes direction with the flow of news and events. Investors must note here that this is just an informal indication and has no official acceptance. The best thing one can do with the GMP is to observe the trend closely as that gives the best hints on listing status. Focus on the time series trend than on numbers.

Adani Enterprises Limited, is the incubating company of the Adani group and has been around since 1988. As the incubator of the group, Adani Enterprises has interests in energy and infrastructure platform in India. Adani Enterprises nurtured businesses like Adani Power, Adani Ports, Adani Transmission, Adani Green Energy, and Adani Total Gas with a focus on ESG and make-in-India self-reliance. Adani group is into mining services, edible oils, water, data centres, solar manufacturing and airports.

Adani Enterprises is an existing profitable company. The funds will be used to bankroll future projects of its group companies; including green hydrogen. The issue is being lead managed by ICICI Securities, Jefferies India, SBI Capital Markets, Axis Capital, BOB Capital IDBI Capital, JM Financial, IIFL Securities, Monarch Net Worth Capital and Elara Capital. Link Intime will be the registrars to the issue.