Adani Wilmar IPO: All You Need To Know

Adani Wilmar Ltd., a consumer goods joint venture between Adani Group and Wilmar Group, will sell shares at Rs 218-230 apiece in its three-day initial public offering that opens on Thursday, Jan. 27 and closes on Monday, Jan. 31.

The IPO comprises a fresh issue of Rs 3,600 crore. The company has scaled down the offering size from Rs 4,500 crore, at the time of filing the draft red herring prospectus. The company has reduced funds to be raised for general purposes. This would make the IPO capital-focused, the company said in an interview with BloombergQuint.

Adani Wilmar is seeking a market value of Rs 29,887.8 crore at the upper end of the price band. The company is offering 12% equity of the post-offer equity share capital of the company. The promoters will hold 88% at the end of the IPO.

Issue Details

• Issue opens on: Jan. 27.

• Issue closes on: Jan. 31.

• Issue size: Rs 3,600 crore.

• Face value: Rs 1 apiece.

• Lot size: 65 equity shares and multiples.

• Listing on: BSE and NSE.

• Lead managers: Kotak Investment Banking, JPMorgan, ICICI Securities, HDFC Bank, BofA Securities, Credit Suisse, BNP Paribas.

Use Of Proceeds

The company plans to utilise the net proceeds towards:

• Rs 1,900 crore for funding capital expenditure for expansion of existing manufacturing facilities and developing new manufacturing facilities.

• Rs 1,058.9 crore for repayment/prepayment of borrowings.

• Rs 450 crore for funding strategic acquisitions and investments.

• Around Rs 191.1 crore for general corporate purposes.

Business

Adani Wilmar is among few large food companies in India that sell most primary kitchen commodities to consumers, including edible oil, wheat flour, rice, pulses and sugar. Kitchen commodities account for 66% of primary kitchen spends in India.

The company is a joint venture incorporated in 1999 between the Adani Group, and the Wilmar Group, one of Asia’s leading agribusiness groups.

Its portfolio of products spans across three categories:

• Edible oil.

• Packaged food and FMCG products.

• Industry essentials.

Nearly 73% of the branded sales is accounted for by edible oil, food, and FMCG sales volume for the financial year 2021.

It has 22 plants in India located across 10 states, comprising 10 crushing units and 19 refineries. Of the 19 refineries, ten are port-based to facilitate use of imported crude edible oil and reduce transportation costs, while the remaining are mostly located in the hinterland, in proximity to local raw material production bases to reduce storage costs.

Its refinery in Mundra is the largest single-location refinery in India with a designed capacity of 5,000 MT per day. In addition, it also owns 36 leased tolling units in India at the end of Sept. 30, 2021, which provide additional manufacturing capacities.

The company claims to have the largest distribution network among all branded edible oil companies in India. As of Sept. 30, 2021, they had 5,590 distributors in India, located in 28 states and eight union territories, catering to over 16 lakh retail outlets. These retail outlets represent approximately 35% of the retail outlets in India.

The company had 88 depots in India, with an aggregate storage space of approximately 18 lakh square feet across the country.

As of March 31, 2021, the refined oil in consumer packs or ROCP market share of its branded edible oil was 18.30%. Fortune, its flagship brand, was the largest selling edible oil brand in India.

Financials

The company ended the half-year ended Sept. 30, 2021 with a net profit of Rs 357.13 crore, and revenue from operations of Rs 24,874 crore. It ended the period with an Ebitda margin of 3.2%.

It plans to expand its operations into branded value-added food products, which would help improve its margins.

Peer Competition

Adani Wilmar competes with FMCG players in varied segments, but its portfolio and business profile is most comparable with Patanjali Ayurved Ltd.

Risk Factors

• Its operations are dependent on the supply of large amounts of raw materials, such as unrefined palm oil, soyabean oil and sunflower oil, wheat, paddy and oilseeds. Unfavourable local and global weather patterns may have an adverse effect on the availability of raw materials.

• It depends significantly on imports of raw materials/finished goods in addition to domestic supplies. Various factors may result in an inadequate supply of raw materials/finished goods or result in an increase in cost in order to secure sufficient raw materials/finished goods to meet operational requirements.

• It has a diverse range of products primarily in three business categories, and its inability to manage diversified operations may have an adverse effect on business, results of operations and financial condition.

• Certain companies within the Adani Group, including certain members of its promoters, promoter group and group companies, are involved in various legal, regulatory and other proceedings, which could have an adverse impact on business and reputation.

• It derives a significant portion of revenue from edible oil business segment. Any reduction in demand or in the production of such products could have an adverse effect on business.

• Its is, to an extent, dependent on the prices of the commodities that it sells, including palm oil, sunflower oil, grain and castor oil. These fluctuate due to factors such as world supply and demand, supply of raw materials, weather, crop yields, trade disputes between governments of key producing and consuming countries, and governmental regulation.

• Import restrictions by other countries on products may have a material adverse impact on business, financial condition and result of operations.