Adani’s fundraising targets retail buyers, allows for discounted pricing | News Bharat

Selling 200 billion rupees ($2.5 billion) worth of shares through the additional public offering mechanism approved on Friday gives the company maximum flexibility, including discount pricing to target more investors, Chief Financial Officer Jugeshinder Singh said in an interview . After attracting strategic investors in recent years, Singh said the conglomerate is looking for a broader investor base that doesn’t mind a company investing in long-term projects that may take time to show returns.

“We made strategic capital. The next capital is patient capital,” Singh said. “Indian mom and pop investors are investing for their children and grandchildren.”

The pricing flexibility of selling shares at a discount can make the offering more affordable for shares that are trading at high valuations. The fundraising is part of the billionaire’s larger efforts to reduce his debt ratio, seek global legitimacy among investors and silence his naysayers. Concerns have grown that its breakneck expansion into media, cement and green energy has increased leverage and financial complexity at the ports-to-power conglomerate.

The follow-on share offer “allows the company to broaden its investor base” as both new retail and institutional investors can participate, according to Sandeep Bhagat, a Mumbai-based partner at S&R Associates. “Free pricing is allowed, unlike a qualified institutional placement,” and the company’s founders don’t have to put their own money into a further sale of shares, unlike a rights issue, he said.

Prices freely

The ability to price freely will be very valuable for a stock that has gained more than 2,000% in the past four years, data compiled by Bloomberg show. Adani Enterprises trades at a valuation of over 158 times its one-year forward earnings. In comparison, Reliance Industries Ltd. — India’s largest company by market value — is around 22 times, while the NSE Nifty 50, an index that includes Adani Enterprises, is around 20 times.

At least 35% of the further share sale will have to be offered to retail investors. That’s equity worth as much as 70 billion rupees, or slightly less than what the country’s biggest share sale by Life Insurance Corporation of India tried to raise earlier this year from retail investors through a deeply discounted initial public offering.

This fundraising effort could also increase traffic and improve visibility among retail investors, said Manan Lahoti, partner at IndusLaw in Mumbai. The company, known for incubating Adani’s new businesses before they are mature enough to be spun off, is currently tracked by only two brokerages.

The further share sale is the result of a strategic decision made several years ago – to restructure debt, attract strategic investors and then channel capital to patients for growth, according to group CFO Singh.

This story was published by a wire agency feed with no text changes.