Shares of Adani Enterprises fell more than 2% to Rs 3,501 on the NSE on Thursday, a day after the Adani group of companies announced a floor price for its follow-on public offering (FPO) to raise up to Rs 20,000 crore. Adani Enterprises FPO is the largest in the Indian market, and Adani will sell shares in the company, which has nearly doubled in value over the past year. Adani Enterprises has decided on a floor price of Rs 3,112 per share for the FPO opening on January 27. The cap price of the offer is fixed at Rs 3,276 per share for all classes of investors. The company has also approved a discount of Rs 64 per share in the FPO for retail investors participating in the bidding of the retail tranche of the offer. The minimum bid lot size is four shares (after that, in multiples of four shares). Subscriptions for the FPO will close on January 31, 2023.

According to the RHP, shares totalling up to Rs 50 crore will be reserved for eligible employees to bid in the FPO, at most 5% of the paid-up share capital post-offer. At least 35% of the shares are reserved for retail investors. Shares will be allocated to the allottees’ demat account by February 7 and can be traded from February 8.

A batch of Adani Enterprises shares in the FPO is priced at the upper end of the price range at Rs 13,104. At the lower end of the range, FPO shares were quoted at a discount of 13.44% to Wednesday’s closing price of Rs 3,595.35 per share on the BSE.

For the uninitiated, an FPO is an offer to sell additional shares, while an IPO, or initial public offering, is the first sale of a company’s shares. An FPO is often considered superior to an IPO because investors can gain insight into a company’s stock, performance, business practices, and growth forecasts. Also, investors are very familiar with the stock and its price range. FPO is done by companies that are already public to diversify their shareholding. The previous largest FPO was Rs 15,000 crore shares sold by Yes Bank in 2020.

In the RHP, Adani Enterprises said it plans to use the proceeds of the FPO to meet capital expenditure requirements, repay debts owed by the company and three subsidiaries, and for general corporate purposes. Of the Rs 20,000 crore proceeds from the FPO, Rs 10,869 crore will be used for green hydrogen projects, work on existing airports and construction of greenfield highways. In contrast, it said that Rs 4,165 crore would be used to repay borrowings from Adani Airport Holdings, Adani Road Transport, and Mundra Solar.

Shares of Adani Enterprises closed 1.2% lower at Rs 3,595.35 per share on the BSE on Wednesday. The stock has outperformed the benchmark index in the past year, nearly doubling from Rs 1,828 in January 2022 to Rs 3,584.9 on Wednesday, January 19, 2023. The benchmark Nifty 50, on the other hand, has witnessed volatility over the year but remained flat after a year, falling from 17,617 points in January 2022 to 18,165 points on Wednesday. Adani Enterprises is valued at more than 141 times its one-year forward earnings. By comparison, according to data compiled by Bloomberg, Reliance Industries Ltd, India’s largest company by market value, is valued at about 20 times.