Gautam Adani backed Adani Enterprises will be rolling out the country’s largest Follow on Public Offer (FPO) this week. The FPO is set to go live on 27th January and will end on 31st January. Let us understand what an FPO issue is and what makes the Adani Enterprises FPO different.
What is an FPO? How is it different from IPO/Rights Issue/OFS
FPO is a process in which an existing company already listed on the stock exchange(s) raises capital by issuing new shares to the public. The public may be the existing shareholders or completely new investors.
In a Rights Issue, an existing company already listed on the stock exchange(s) raises capital by issuing new shares only to the existing shareholders.
Offer for Sale (OFS) is a process in which existing shareholders of a listed company who holds at least 10% of share capital of the company can offload/dilute their shares by selling them to the public via exchange(s) mechanism.
It should be noted that the OFS route is only enabled for companies having market capitalization of 1000 crores or more above, with the threshold of market capitalization computed as the average daily market capitalization for six months’ period prior to the month in which the OFS opens.
How is Adani FPO different?
Adani Enterprises will be issuing partly paid shares in the FPO. This essentially means that the entire value of share will be collected in tranches. In the first tranche, the company will raise only 50% of the total share value and the next 50% will be raised by one or more call monies.
The Math Behind Adani FPO
The price band announced is ₹3112 to ₹3276 per share. Let us take the upper price band of ₹3276 per share.
50% of ₹3276 = ₹1638 per share
Now, on application retail participants will be offered a discount of ₹64 per share.
Hence, for the retail participants on application price to pay will be ₹1638 - ₹64 = ₹1574 per share
Remaining amount of ₹1638 will be called in one or more instalments (call monies).
To summarise,
| Tranche | Face Value | Premium | Paid up Value |
|---|---|---|---|
| On Application | ₹0.50 | ₹1573.50 | ₹1574.00 |
| Subsequent calls | ₹0.50 | ₹1637.50 | ₹1638.00 |
| Total | ₹1.00 | ₹3275.00 | ₹3212.00 |
How to Participate in Adani Enterprises FPO
The Adani Enterprises FPO can be found under the IPO Header in the Money Section. The application process is similar to an IPO.
- Open the Dhan app
- Go to the Money section
- Scroll to the IPO header
- Click on Adani Enterprises FPO - Apply Now
FAQs
1. I have applied and got the allotment, can I sell these shares on the exchange?
Yes. Since fully paid up shares (Symbol: ADANI) and partly paid up shares (Symbol: ADANIPP) will both be listed, make sure to check what you are selling.
2. I can see two entries of Adani Enterprises in my holdings, why?
Adani Enterprises will be issuing partly paid shares in the FPO which will be listed under a different temporary ISIN. Once all the call money obligations are fulfilled, the partly paid up shares are converted to fully paid up shares and trade with the existing ISIN of the original equity shares.
3. When will I know that RTA or the company has made a call money?
This information is available in the company’s letter of offer and will be conveyed by the company/RTA over email as and when due. Usually 15 days prior, RTA informs the shareholders on the payment window of the call money.
4. How much time would be given by the company to fulfil the obligation of call money?
Generally the Investors are given at least 14 days’ notice for the payment of the Calls. However, the management of the company may extend the time fixed for the payment.
5. What happens if I fail to fulfil any of the call money obligations?
If an investor fails to fulfil any of the call money obligation, he may be liable to pay interest fixed by the company or it may forfeit the application money and any call money received for previous calls made.
6. What is the dividend and voting rights available on partly paid up equity shares?
Dividend and voting rights shall be considered in proportion to the paid up amount by the investor.
Thanks and Regards
Shrimohan Jhawar
Product Operations @ Dhan
