Adani Wilmar Ltd, incorporated in 1999 as a joint venture between Adani Group and Wilmar Group of Singapore, is an FMCG company offering kitchen commodities for Indian consumers including edible oil, wheat flour, rice, pulses, and sugar.
The products can be categorized into three buckets: edible oil, packaged food & FMCG, and industry essentials. Adani Wilmar markets its edible oil under its flagship brand Fortune which is the largest selling edible oil brand in India.
Adani Wilmar will float its Rs 3,600 crore initial public offering (IPO) on January 27 and close it on January 31.
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About the IPO
An IPO of Rs 3,600 crore only includes new issuance of about 15.65 crore shares and excludes commercial offers.
Shares will be awarded for Rs 218-230 each. Investors can bid for at least 65 shares and at 65 times thereafter. Retail investors can invest a minimum of Rs 14,950 in one place and their maximum investment can be Rs 194,350 in 13 lots.
Promoters’ shares will drop from 100 percent to 87.92 percent after a public issue.
Adani Wilmar IPO: Future Plan
Adani Wilmar plans to aggressively look at Merger and Acquisition Prospects in the foods space. Out of the IPO proceeds, Rs 1,900 crore will be used for capital expenditure, Rs 1,100 crore will be used for the repayment of debt, and Rs 500 crore in funding strategic acquisitions and Investments. The Company has an annual revenue of Rs 37,195 crore.
Currently, six Adani group companies are listed on the bourses, namely Adani Enterprises, Adani Power, Adani Total Gas, and Adani Ports and Special Economic Zone, Adani Transmission, Adani Green Energy.
Adani Wilmar IPO: Valuation
Choice Broking mentioned,”At the higher price band of Rs 230, the company is demanding a P/E (price to earnings) multiple of 37.5x (to its TTM or trailing twelve months earning of Rs 6.1), which is at a discount to the peer average of 57.6x.”
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K R Choksey
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Positives:
- Shift in consumer preferences towards packaged foods
- Strong brand recall across price points
- Capital infusion to support growth
- Strong research and development team
Concerns:
- Potential uncertainty on raw material procurement front
- Volatility in forex markets
- Slowdown in rural momentum
- Excessive dependence on Edible Oil segment
Angel One
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Positives:
- Diversified portfolio with leading brands catering to most daily kitchen essentials
- Strong manufacturing capacity with 22 manufacturing units in India
- Largest distribution network among all branded edible oil companies in India
Concerns:
- Volatility in raw materials
- Increase in competition could impact profitability
Choice Broking
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Positives:
- Differentiated and diversified product portfolio with market leading brands
- Strong raw material sourcing capabilities
- Extensive pan-India distribution network
- Strong parentage with professional management and experienced board
Concerns:
- Unfavourable government policies and regulations
- Sustained general inflationary environment
- Fluctuations in key commodity prices and forex rates
- Unfavourable sales mix
Arihant Capital
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Positives:
- Covid has accelerated digitalization of customer interactions with hospitality and travel companies
- Marquee global customers with long-term relationships
- Innovative AI driven industry relevant SaaS solutions
- Track record of successful acceleration post acquisitions
Concerns:
- Unable to predict acquisition patterns due to demand volatility
- Inability to drive customer delight to increase retention
- No interoperability increases acquisition costs
