Adani Wilmar IPO opens Thursday, price band fixed at Rs 218-230; should you subscribe? What brokerages say

From the net proceeds, Rs 1,900 cr will utilized to fund the capital expenditure, another Rs 1,058.9 cr will be used for the payment of the borrowings and rest Rs 450 cr will be utilized for funding strategic acquisitions & investments.

Adani wilmar IPO
The Rs 3,600 cr public offering comprises fresh issue of new equity shares only

Adani Wilmar IPO will open on Thursday (27 January), and will close on Monday (31 January). A a joint venture between Adani Group and the Wilmar Group, Adani Wilmar is an FMCG food company offering most of the essential kitchen commodities. The edible oil major has fixed a price band of Rs 218-230 per share for the public issue. The Rs 3,600 cr public offering comprises fresh issue of new equity shares only. The promoter’s holding in the company will stand reduced to 87.95% after the issue. The bidding for anchor investors will start today (25 January) for the initial share sale. Ahead of the IPO launch this week, several brokerage firms have assigned a ‘SUBSCRIBE’ rating to the issue.

Angel One Ltd: SUBSCRIBE

“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% and ~39% 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”.

Ventura: SUBSCRIBE

“By FY24 the FMCG revenue share is expected to climb to ~7.4% (+220 bps) leading to EBITDA/PAT growth of 23.4% / 19.9% to INR 2,491 cr/ 1,253 cr respectively by FY24. We initiate with a Subscribe for long term with a 24-month price target of INR 468.8 per share (48.6X FY24 earnings) representing an upside potential of 103.8% from the issue price upper band at INR 230/share.”

Marwadi Financial Services: SUBSCRIBE

“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 “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 reasonable valuation as compared to its peers.”

Choice Broking: SUBSCRIBE

“At higher price band of Rs 230, AWL is demanding a P/E multiple of 37.5x, 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.”

Adani Wilmar IPO Grey Market Premium (GMP)

Ahead of the IPO launch this week, Adani Wilmar shares were trading at a premium of Rs 50 in the grey market. The grey market premium has dropped by half from Rs 100 earlier on Friday. The company’s shares are expected to list on stock exchanges BSE and NSE on 8 February.

According to JM Financial Services’ IPO note, one of the key risks is the fact that Adani Wilmar’s operations are dependent on the supply of large amounts of raw materials, such as unrefined palm oil, soybean 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 said.

“In addition, the company does not have long term agreements with suppliers for its raw materials. Any increase in the cost of, or a shortfall in the availability of, such raw materials could have an adverse effect on the business and results of operations, and seasonal variations could also result in fluctuations in the results of operations,” it added.

Adani Wilmar is one of the few large FMCG food companies in India to offer most of the primary kitchen commodities for Indian consumers, including edible oil, wheat flour, rice, pulses and sugar. The company has 22 plants which are located across 10 states in India, comprising 10 crushing units and 19 refineries. Their refinery in Mundra, Gujarat is the one of the largest single location refineries in India, according to Axis Capital’s IPO note. Adani Wilmar has cut the size of its IPO to Rs 3,600 crore from the Rs 4,500 crore planned earlier.

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