Adani Wilmar initial public offering (IPO) will be open for subscription tomorrow, January 27, 2021. The price band has been fixed at Rs 218-230 a share for its public issue through which it aims to raise up to Rs 3,600 crore. The edible oil major on Tuesday said it has garnered Rs 940 crore from anchor investors.
At 1200 hours on Thursday, the Adani Wilmar IPO was subscribed 24 per cent. The portion reserved for qualified institutional buyers (QIBs) and non-institutional investors were subscribed 11 per cent and 5 per cent respectively. The quota meant for retail investors was booked 49 per cent.
The IPO comprises a fresh issue of new equity shares of face value Re 1 for an amount of up to Rs 3,600 crore, the filing said. Promoters and existing shareholders are not offloading their stake via OFS in the issue.
The company has trimmed its issue size to Rs 3,600 crore from Rs 4,500 crore earlier. It has reserved equity shares aggregating up to Rs 107 crore for its eligible employees, who will get a discount of Rs 21 per share during the bidding process.
Adani Wilmar IPO: Future Plan
Adani Wilmar plans to aggressively look at M&A (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 Transmission, Adani Green Energy, Adani Power, Adani Total Gas, and Adani Ports and Special Economic Zone.
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.”
Adani Wilmar IPO: All you Need to Know About the Company
Adani Wilmar is a joint venture between Adani Enterprises and the global Wilmar Group. It is one of the few large FMCG food companies in India. Its portfolio spans three categories: edible oil, FMCG and packaged food, industry essentials. It caters to essential kitchen requirements like edible oil, wheat flour, sugar, rice, pulses. It also offers a range of industry essentials and de-oiled cakes. Its brand ‘Fortune’ is the largest selling edible oil brand in the country.
The company aims to launch edible oil products, rice bran health oil, fortified foods, ready-to-cook soya chunks, and more as part of its future strategy. It has 22 manufacturing facilities across the 10 states of the country, including 10 crushing units and 18 refineries. Its Mundra refinery is India’s largest single-location refinery.
Adani Wilmar IPO: GMP
As per market observers, Adani Wilmar shares premium (GMP) are available at Rs 44 in the grey market today.
Adani Wilmar IPO: Should you Subscribe?
Choice Broking highlights that the key strengths of the company are its market leading position in industry essentials, strong raw material sourcing capabilities and its integrated business model with well-established operational infrastructure and strong manufacturing capabilities.
The brokerage suggests that the company faces risks from unfavourable government policies and regulations and difficulty in expanding the food and FMCG business. Probability of sustained general inflationary environment, fluctuations in key commodity prices and unfavourable forex rates can also impact the prospects of the company.
Its edible oil business is likely to have a secular growth trend, but there is a huge untapped market for its food and FMCG business segment. “Thus considering the above observations, we assign a subscribe rating for the issue,” said the brokerage.
Angel One considers volatility in raw material prices and increase in competition as major risks the company faces. On valuation, it said, “the post-issue TTM P/E works out to 37.6x (at the upper end of the issue price band) which is reasonable considering Adani Wilmar’s historical topline and bottomline CAGR of 13% and 39 per cent respectively over FY19-21”.
Further, Adani Wilmar has strong brand recall, wide distribution, better financial track record and healthy ROE (return on equity). “Considering all positive factors, we believe this valuation is at reasonable levels. Thus, we recommend a subscribe rating on the issue,” advised the brokerage in its report.
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