Mutual funds, FPIs show appetite for a slice of Adani FPO anchor pie

Bankers see excess demand in Rs 6,000-cr anchor book

Large domestic mutual funds (MFs) and foreign portfolio investors (FPIs) are seeking allotment in the anchor category of the Rs 20,000-crore follow-on public offering (FPO) of Adani Enterprises (AELs). Investment bankers said they expect anchor demand to exceed supply of shares meant for anchor investors.
 

AEL’s FPO committee is expected to meet on Wednesday to finalise anchor allotment, where up to Rs 6,000-crore worth of shares can be allotted to qualified institutional buyers (QIB). AEL’s anchor book will be second-largest among domestic share sales after Patym.
 

Anchor allotment,  made a day before an IPO or a FPO opens, provides cues to other investors looking to participate. A large diversified anchor book sends a positive signal to investors.
 

“We have got encouraging responses during the FPO roadshow. That will reflect in the quality of the anchor book,” said an investment banker handling the share sale.
 

AEL has set a price band of Rs 3,112-Rs 3,276 per share for the FPO. Shares of the company ended at Rs 3,456 on Friday. Shares of AEL have declined 15 per cent in the past one month. However, they have rocketed 15 times in the past three years and are double compared to levels seen a year ago.

 

Jugeshinder Singh, chief financial officer for the Adani Group said the company was not able to communicate well with the investor community over the past five years. The FPO, he said, is aimed at attracting a diversified investor base.
 

Sources said the majority of the top 15 MF houses could subscribe to shares in the FPO. Similarly, large long-only FPIs and sovereign wealth funds are said to sign big cheques. 
 

“The FPO is a good opportunity to address the under-ownership concerns for most large funds. Several investors both domestic as well as global have missed out on the phenomenal gains generated by the Adani group companies,” said a fund manager.
 

MFs have largely avoided Adani group stocks on concerns around stretched valuations and excessive leverage. As of September 2022, MFs holding in Adani Enterprises was just 1.27 per cent and that too through their index funds and ETFs. As of December 2022, none of the active schemes of top 25 fund houses had any significant holding in Adani Enterprises.
 

In comparison, mutual funds had 5.7 per cent holding in Reliance Industries in the September quarter.
 

“We would still be cautious. Most of the rally may have already played out in the Adani group stocks. A lot of optimism has already got built in. However, many funds would still participate as there is a lot of pressure from investors after having missed the bus,” said a fund manager.
 

Domestic money managers' decision to not to invest in Adani group stocks proved costly from the performance perspective in 2022. Last year, 83 per cent of active large-cap funds underperformed the S&P BSE 100 Total Returns Index. Adani Group stocks were among the top performers in large-cap benchmarks last year.