Adani Wilmar IPO - Information Note

5paisa Research Team 5paisa Research Team 10th December 2022 - 06:20 pm

Adani Wilmar Ltd is a joint venture between Adani Enterprises and Wilmar of Singapore. It has been in existence since 1999 and in the last 23 years, Adani Wilmar has emerged as the second largest FMCG player in India on sales revenues after Hindustan Unilever. Adani Wilmar business portfolio is divided into 3 segments viz. Edible Oils, Packaged Foods and Industry essentials. More than 75% of top line in terms of volumes comes from edible oils while the B2B industry essentials has higher relative value quotient.

Adani’s Fortune brand edible oil is a market leader in India. Since 2013, the company is also into packaged wheat flour, rice, pulses, besan, sugar, soya chunks and ready-to-cook Khichdi. Adani Wilmar has a total of 22 plants which comprise of 10 crushing units and 19 refineries. With another 36 units available on lease, Adani Wilmar has the capacity to substantially scale up operations at short notice. They reach out to over 16 lakh retail outlets via 5,600 distributors. Adani WIlmar also manages its logistics through 88 depots.

Key terms of the IPO issue of Adani Wilmar Ltd

Key IPO Details	Particulars	Key IPO Dates	Particulars
Nature of issue	Book Building	Issue Opens on	27-Jan-2022
Face value of share	Rs.1 per share	Issue Closes on	31-Jan-2022
IPO Price Band	Rs.218 - Rs.230	Basis of Allotment date	03-Feb-2022
Market Lot	65 shares	Refund Initiation date	04-Feb-2022
Retail Investment limit	13 Lots (845 shares)	Credit to Demat	07-Feb-2022
Retail limit - Value	Rs.194,350	IPO Listing date	08-Feb-2022
Fresh Issue Size	Rs.3,600 crore	Pre issue promoter stake	100.00%
Offer for Sale Size	Nil	Post issue promoters	87.92%
Total IPO Size	Rs.3,600 crore	Indicative valuation	Rs.29,900 crore
Listing on	BSE, NSE	HNI Quota	15%
QIB Quota	50%	Retail Quota	35%

_{Data Source: IPO Filings}

Check - Adani Wilmar IPO - 7 Things to Know

Here are some of the key aspects of the Adani Wilmar Ltd business model

1) It controls the complete value chain from manufacturing to distribution and even logistics which gives them total control over the process flow.

2) Its total fresh issue raising of Rs.3,600 crore will be allocated to capex, loan repayment and inorganic growth; all of which are value accretive as IPO triggers.

3) Adani Wilmar Ltd has consistently growth profits, EBITDA margins and net profit margins with calibrated improvement in asset turnover ratios.

4) The 18.3% market share in edible oils segment in the Indian markets places them as the top player, giving them the dividends of niche leadership. FMCG is growing rapidly.

5) Positioned in a sweet spot to capitalize on the India consumption story as well as on rising demand for packaged and ready-to-cook meals in India.

6) Adani Wilmar has substantial capacity slack across crushing, refining and packaged foods allowing them to boost profits through better cost absorption in future.

7) The Adani group is a $150 billion market cap group and this allows them the leverage to take a longer term view of business due to a much bigger balance sheet.

How is the Adani Wilmar Ltd IPO structured?

The IPO of Adani Wilmar Ltd is entirely a fresh issue, with no OFS component.

A) The Adani Wilmar IPO consists of Rs.3,600 crore of will be in the form of a fresh issue. This was reduced from Rs.4,500 crore as filed originally. The fresh funds will be predominantly applied towards capital expenditure and loan repayment.

B) The fresh issue will comprise issue of 1,570.39 lakh shares and at the upper price band of Rs.230, the IPO is worth Rs.3,600 crore. This will include employee reservation of Rs.107cr and reservation of Rs.360 crore for shareholders of Adani Enterprises.

C) Post the offer for sale, the promoters viz. Adani Enterprises and Wilmar, will see their combined stake come down from 100.00% to 87.92%. Public shareholding overall will go up to 12.08% post the IPO.

Key Financial parameters of Adani Wilmar Ltd

Financial Parameters	Fiscal 2020-21	Fiscal 2019-20	Fiscal 2018-19
Sales Revenues	Rs.37,090.42 cr	Rs.29,657.04 cr	Rs.28,797.46 cr
EBITDA	Rs.1,430.56 cr	Rs.1,419.48 cr	Rs.1,253.46 cr
Net Profit / (Loss)	Rs.727.65 cr	Rs.460.87 cr	Rs.375.52 cr
EBITDA Margins	3.85%	4.77%	4.33%
Net Profit Margins (NPM)	1.96%	1.55%	1.30%
Return on Equity	22.06%	17.93%	17.79%
Debt / Equity Ratio	0.36X	0.50X	0.50X

_{Data Source: Company RHP}

Adani Wilmar has shown sustained growth in revenues over last 3 years and the first half of FY22 also indicates momentum sustaining. This is an industry with low net margins as currently, the FMCG model of Adani Wilmar is more commoditized with focus on the value chain ownership. However, as brands are reinforced, the margins would improve in tandem.

Investment Perspective for Adani Wilmar Ltd IPO

Here is what investors must consider before investing in the Adani Wilmar Ltd IPO.

a) Adani Wilmar has a dominant position in edible oils and owns the total value chain from sourcing raw materials to dealer networks, giving them better control.

b) The balance sheet and the market cap muscle of the Adani group is certainly a big advantage. This allows Adani Wilmar to play the long haul game with competition.

c) One area to watch would be the net margins which is below FMCG levels. However, that is bound to change as brands get reinforced.

d) At a post issue market cap of Rs.29,900 crore and FY21 net profits of Rs.728cr, you have historic P/E of 41 times, substantially lower than other listed FMCG peers. But other FMCG players enjoy much higher EBITDA margins and ROCE.

The lower P/E ratio compared to FMCG peers is more due to the commoditized nature of the business. As Adani Wilmar moves up the value chain towards better ROCE; valuations should automatically improve. For now, the stock does offer a good play on the Indian FMCG sector with a rather robust model that is backward and forward integrated.

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