Another mainstream IPO has hit the Indian stock markets! Adani Wilmar Ltd, the company behind the popular “Fortune” brand of edible oils, has launched its IPO today. In this article, we take a close look into the company and learn more about its IPO.

Company Profile – Adani Wilmar Ltd

Adani Wilmar Ltd (AWL) is a fast-moving consumer goods company (FMCG) that offers essential kitchen commodities. Incorporated in 1999, it is a joint venture between the Adani Group and Wilmar Group (a multinational agribusiness group).

AWL offers a diverse range of products across three categories: 

  1. Edible oils such as soya oil, palm oil, sunflower oil, groundnut oil, cottonseed oil, mustard oil, rice bran oil, and specialty fats. The company’s flagship brand, Fortune, is the largest selling edible oil brand in India.
  2. Packaged food and FMCG products: This segment includes wheat flour, basmati rice, soya nuggets, pulses. AWL is among the top five fastest-growing packaged food companies in India in terms of revenue.
  3. Industry essentials such as de-oiled cakes, oleochemicals, castor oil & derivatives.

The company has a well-established operational infrastructure and strong manufacturing capabilities. It operates 22 plants across ten states in India, comprising 10 crushing units and 19 refineries. Its refinery in Mundra (Gujarat) is one of the largest single-location refineries in India, with a capacity of 5,000 metric tonnes (MT) per day. As of Sept 30, 2021 (Q2 FY22), the company had 88 depots in India, with an aggregate storage space of ~1.8 million square feet.

Adani Wilmar claims to have the largest distribution network among all branded edible oil companies in India. They had 5,590 distributors across 28 states and 8 Union Territories, catering to over 16 lakh retail outlets as of Q2. 

About the IPO

Adani Wilmar Ltd’s public issue opens on January 27 and closes on January 31. The company has fixed Rs 218-230 per share as the price band for the IPO.

The IPO includes a fresh issue of about 15.65 crore shares, aggregating to Rs 3,600 crore. Individual investors can bid for a minimum of 65 equity shares (1 lot) and in multiples of 65 shares thereafter. You will need a minimum of Rs 14,950 (at the cut-off price) to apply for this IPO. The maximum number of shares that can be applied by a retail investor is 845 equity shares (13 lots).

AWL will utilise the net proceeds from the IPO for the following purposes:

  • Funding capital expenditure for expansion of existing manufacturing facilities and developing new facilities – Rs 1,900 crore
  • Repayment or prepayment of borrowings – Rs 1,058.9 crore
  • Funding strategic acquisitions and investments – Rs 450 crore
  • General corporate purposes – Rs 191.1 crore

The total promoter holding in the company will decline from 100% to 87.92% post the IPO.

Financial Performance

Adani Wilmar Ltd has posted a consistent increase in revenue and net profit over the past three financial years (FY19-21). It reported revenue growth of 13.5% year-on-year (YoY) to Rs 37,090 crore in FY21. The FMCG company’s EBITDA grew at a CAGR of 8.2% to Rs 1,325 crore over the same period. Nearly 73% of their revenue came from edible oil and packaged food & FMCG sales in FY21. However, its margins have been affected by higher input costs.

AWL’s revenue from operations for the six months ended September 30, 2021 (H1 FY22) rose 53.65% YoY to Rs 24,874.51 crore. Net profit stood at Rs 357.13 crore in H1 FY22, up 23.6% YoY. 

Risk Factors

  • AWL is dependent on the regular supply of large amounts of raw materials, including unrefined palm oil, soybean oil, wheat, paddy, etc. Unfavourable local and global weather patterns may have an adverse effect on the availability of raw materials.
  • The inability to manage its diversified operations could have a severe impact on the company’s business and financial conditions.
  • AWL derives a significant portion of its revenue (~82%) from its edible oil business segment. Any reduction in demand for such products can harm the company’s financial performance.
  • Import restrictions by other countries on Adani Wilmar’s products could have an adverse impact on its business.
  • Improper handling, processing & storage of raw materials and products or any damage/contamination of products could subject AWL to legal actions.
  • Certain companies within the Adani Group (including its promoters) are involved in legal proceedings.

IPO Details in a Nutshell

The book-running lead managers to the public issue are BNP Paribas, BofA Securities India, Credit Suisse Securities, HDFC Bank, ICICI Securities, J.P. Morgan India, and Kotak Mahindra Capital. Adani Wilmar Ltd had filed the Red Herring Prospectus (RHP) for its IPO earlier this month. You can read it here

Ahead of the IPO, AWL raised Rs 940 crore from anchor investors. The marquee investors include the Government of Singapore, Jupiter India Fund, Societe Generale, and Volrado Venture Partners Fund. It also includes HDFC Mutual Fund, Nippon Life India Trustee, Sun Life Excel India Fund, etc.

Conclusion

Adani Group is coming out with an IPO after 12 years! Adani Wilmar aims to capture a large share of kitchen spends across India with its differentiated and diversified product portfolio with market-leading brands. The strong brand value and raw material sourcing capabilities will augment its future growth. The company seeks to acquire manufacturing units or brands in the food staples business such as wheat flour, rice, ready-to-cook, and ready-to-eat segments. They have also been focusing on value-added products (rice bran oil, besan, pulses) and healthy superfoods to diversify revenue streams and generate higher margins. Thus, one could invest in AWL for the long term based on its future prospects.

AWL will be directly competing with major FMCG players such as Hindustan Unilever Ltd, Britannia Industries, Tata Consumer Products, Marico, and Patanjali Ayurved once it gets listed.

Adani Wilmar’s IPO shares are trading at a premium of just Rs 45-50 in the grey market. Before applying to this IPO, we will wait to see if the portion reserved for institutional investors gets oversubscribed. Do consider the risks associated with this company and come to your own conclusion.

What are your views on this IPO? Will you be applying for it? Let us know in the comments section of the marketfeed app.

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