Trading activity in the rights entitlements (REs) of Adani Enterprises intensified sharply during the final two trading sessions of the week. This surge comes as the deadline for the conglomerate's massive Rs 25,000-crore rights issue approaches on December 10.
What Are Rights Entitlements and Why the Frenzy?
Rights entitlements are digital coupons issued to a company's existing shareholders when it launches a rights issue to raise capital. These REs give shareholders the privilege to buy additional shares at a predetermined price, often at a discount. If a shareholder chooses not to invest more money, they can sell these REs on the stock exchange to monetize the right. For the Adani Enterprises offer, exchanges opened a special, short-term trading window specifically for these REs.
In the last two sessions before the weekend, nearly 50 lakh REs changed hands on the National Stock Exchange (NSE) and Bombay Stock Exchange (BSE). This heightened activity propelled the price of these entitlements upward by a significant 23%.
Major Investors Back the Offer
The rights issue offers new shares at Rs 1,800 per share, which is substantially lower than the current market price of around Rs 2,265. This attractive discount is a key driver behind the strong interest. Market sources indicate that most institutional investors are expected to subscribe to the offer.
Prominent long-term backers are leading the charge. GQG Partners, the US-based investment fund, which already holds approximately 6% in Adani Enterprises, will pick up additional shares. Domestic insurance behemoth Life Insurance Corporation (LIC) and Abu Dhabi's International Holding Company (IHC), each holding about a 4% stake, are also participating. Furthermore, a host of domestic mutual funds, with a collective holding of about 3.5%, are subscribing to the offer.
The company's promoters, who hold a 74% stake, have already committed to subscribing to their full quota. Market players note that most of the trading in REs is being done by retail investors, who hold about 8% of the company.
Volatile Trading and Use of Proceeds
The trading window for REs opened on November 25. The price journey has been volatile: it initially shot up to as high as Rs 680, then gradually declined to Rs 350 by December 3, before jumping again to close at Rs 431 on December 5. Typically, trading in REs concludes 3-4 days before the rights offer itself closes.
Adani Enterprises plans to use the proceeds from this capital-raising exercise primarily for the repayment of loans and perpetual debt instruments issued by the company and its subsidiary, Adani Airport Holdings Ltd. The rights issue ratio is set at 3 new shares for every 25 shares held as of the record date of November 17.
