Edible oil firms’ IPOs facing SEBI scrutiny as Adani, Gemini on the dock

The capital markets regulator Securities and Exchange Board of India (SEBI) has kept on hold the proposed initial public offerings (IPOs) of two edible oil companies, at a time when the price of cooking oil has shot up sharply over the last few months.
SEBI has kept the proposed IPOs of Adani Wilmar Ltd and Gemini Edibles & Fats India Pvt. Ltd (GEF India) on hold, as per a disclosure note by the regulator on Monday.

It said that the ‘issuance of observations [has been] kept in abeyance’ against the proposed public issues. SEBI’s approval is granted when it actually makes an observation on a draft red herring prospectus (DRHP) or initial documents presented by a company for its public float.

SEBI did not give any reason for the move. It recently approved the Rs 4,300 crore follow-on public offering of Ruchi Soya, a company majority owned by Baba Ramdev-related FMCG major Patanjali Ayurved. Both Adani and GEF India compete with Ruchi Soya.
Adani Wilmar had filed its DRHP on August 3 while GEF India, which is backed by international private equity firm Proterra, had submitted its documents on August 9.

Kotak Mahindra Capital is the left lead manager for the issue of Adani Wilmar, a joint venture between Adani group and Wilmar International. Other bankers include JP Morgan, Bank of America, Credit Suisse, ICICI Securities, HDFC Bank and BNP Paribas. Cyril Amarchand Mangaldas and IndusLaw are the legal counsels as per Indian law and Sidley Austin is the international legal counsel to the managers.

For GEF India, Axis Capital is the lead manager. Other bankers are Credit Suisse, Kotak Mahindra Capital and Nomura.
Edible oil prices have shot up over 50% in less than a year due to various reasons including use of soybean for biofuel in the Americas and impact of the Covid-19 pandemic in Malaysia. India imports a large chunk of cooking oil it consumes and is especially dependent on palm oil imports.

Earlier this month, Indian Prime Minister Narendra Modi announced a National Edible Oil Mission-Oil Palm (NMEO-OP) to make India self-sufficient in cooking oils with over Rs 11,000 crore planned investment.
Adani Wilmar and GEF India join a small club of companies who have faced similar scrutiny by SEBI. Previously, it had similarly parked the approval for IPOs of budget carrier GoFirst (earlier GoAir) and AV Birla Group’s life insurance firm Aditya Birla Sun Life in June.

SEBI holding a proposed IPO does not necessarily mean a long ride to get a fresh green signal.
Aditya Birla Sun Life, in fact, received a clearance earlier this month, though Wadia group firm GoFirst is still waiting for SEBI’s approval.