Edible oil major Adani Wilmar will hit the capital market on January 27 to raise up to Rs 3,600 crore through an Initial Public Offer (IPO). The IPO closes on January 31.
Ahead of its IPO, the company has garnered Rs 940 crore from anchor investors, days before its initial public offering (IPO) roll-out.
Adani Wilmar, which sells its cooking oils and some other food products under Fortuna brand, has cut the size of its initial share sale to Rs 3,600 crore from the Rs 4,500 crore planned earlier.
Adani Wilmar is a 50:50 joint venture between Adani group and Singapore-based Wilmar group.
The price band is Rs. 218 - 230 per share. The IPO only comprises of fresh issue of shares. From the net proceeds, Rs 1,900 crore will utilized to fund the capital expenditure, Rs 1,058.9 crore will be used for the repayment/prepayment of the borrowings and rest Rs. 450 crore will be utilized for funding strategic acquisitions and investment.
50 percent of the net issue are reserved for qualified institutional buyers, while 15 percent and 35 percent of the net issue is reserved for non-institutional bidders and retail investors, respectively.
Promoter currently holds 100 percent stake in the company and post-IPO this will come down to 87.95 percent. Public holding will increase from current nil to 12.05 percent.
Key competitive strengths
• Differentiated and diversified product portfolio with market leading brands to capture large share of kitchen spends across India
• Leading consumer product company in India with leadership in branded edible oil and packaged food business
• Market leading position in industry essentials
• Strong raw material sourcing capabilities
• Integrated business model with well-established operational infrastructure and strong manufacturing capabilities
• Extensive pan-India distribution network
• Focus on environmental and social sustainability
• Strong parentage with professional management and experienced board
Risk and concerns:
• Unfavorable government policies and regulations
• Difficulty in expanding the Food and FMCG business
• Sustained general inflationary environment
• Fluctuations in key commodity prices
• Unfavorable sales-mix
• Unfavorable forex rates • Competition
Should you subscribe?
Choice Broking said: At higher price band of Rs. 230, AWL is demanding a P/E multiple of 37.5x (to its TTM earning of Rs. 6.1), which is at discount to peer average of 57.6x. Its edible oil business is likely to have a secular growth trend, but there is a huge untapped market for its Food & FMCG business segment. Thus considering the above observations, we assign a “Subscribe” rating for the issue.
Angel One said, "In terms of valuations, the post-issue TTM P/E works out to 37.6x (at the upper end of the issue price band), which is reasonable considering AWL’s historical top-line & bottom-line CAGR of 13 percent and 39 percent respectively over FY19-21. Further, Adani Wilmar has strong brand recall, wide distribution, better financial track record and healthy ROE. Considering all the positive factors, we believe this valuation is at reasonable levels. Thus, we recommend a subscribe rating on the issue."
Marwadi Shares said, "Considering the TTM (Sept 21) EPS of Rs.6.12 on a post-issue basis, the company is going to list at a P/E of 37.56x with a market cap of Rs.298,986 mn whereas its peers namely Nestle and Britannia Industries are trading at PE of 81.6x and 54.7x. We assign a “Subscribe” rating to this IPO as the company is a leading consumer product company in India with leadership in branded edible oil and packaged food business. Also, it is available at a reasonable valuation as compared to its peers."
Hem Securities said: "The Company is bringing the issue at price band of Rs 218-230 per share at p/e multiple of 36x on FY21 eps basis. It has differentiated and diversified product portfolio with market leading brands. Also, company is one of India’s leading consumer product companies with leadership in edible oil and packaged food business along with strong raw material sourcing capabilities & integrated business model with wellestablished operational infrastructure and strong manufacturingcapabilities. The Company has extensive pan-India distribution network with focus on environmental and social sustainability and strong parentage with professional management and experienced board. Hence we recommend “Subscribe” on issue."
