By – Mr. Amarjeet Maurya – AVP – Mid Caps, Angel One Ltd
The IPO frenzy in 2021 kept the investors in India exceptionally busy in dealing with initial public offerings (IPOs). A look at the draft red herring prospectuses (DRHPs) indicates that Q1 of 2022 is no different as two dozen companies are coming up with their IPOs during this time. Some companies announcing their IPOs include Oravel Stays (Oyo), Adani Wilmar, Emcure Pharma, Delhivery, etc.
The latest company to be listed is the ₹3,600-crore initial public offering (IPO) of Adani Wilmar. The FMCG company, which sells cooking oils under the Fortune brand, is a 50-50 joint venture between Gautam Adani’s Adani Group and Singapore-based Wilmar Group. Scheduled to open on January 27, the three-day public offering has fixed a price band of ₹218-230 a share for its IPO. The lot size – minimum number of shares that an investor can apply for – is 65 equity shares. Post the issue, the company’s market cap will be Rs 29,900 crores, and the shares are likely to be listed on the exchanges on February 08.
If you are planning to invest in Adani Wilmar, here are the 10 things you must know beforehand:
- Overview of the company
Incorporated in 1999, the FMCG company offers essential kitchen commodities for Indian consumers, including edible oil, wheat flour, rice, pulses, and sugar. The company also provides various industry essentials, including oleochemicals, castor oil and derivatives, and de-oiled cakes. The company offers products under a diverse range of brands across a broad price spectrum and cater to different customer groups.
Its product portfolio is categorized into (i) edible oil, (ii) packaged food and FMCG, and (iii) industry essentials. Fortune, the company’s flagship brand, is India’s largest selling edible oil brand. The company has increased focus on value-added products by launching products such as edible oil products, rice bran health oil, fortified foods, ready-to-cook soya chunks, khichdi, etc.
- Company presence
The company has 22 plants in 10 Indian states, comprising 10 crushing units along with 19 refineries. Its refinery in Mundra is one of the largest single-location refineries in India with a capacity of 5,000 MT per day. Adani Wilmar has also used 36 leased tolling units for additional manufacturing capacities as of September 31, 2021.
As of September 30, 2021, the company had 5,590 distributors in 28 states and eight union territories, catering to over 1.6 million retail outlets. Furthermore, the company had 88 depots in India, spread across the aggregate storage space of approx. 1.8 million square feet.
- Objective for IPO
The company wants to use the money to fund capital expenditure to expand existing manufacturing facilities and develop new manufacturing facilities. The funds will also be used for repayment/prepayment of borrowings, strategic acquisitions and investments, and general corporate purposes.
The company’s revenue has grown at a CAGR of ~13% over FY19-21. On the profit front, the company has reported a strong Net Profit CAGR of ~39% over the same period. During 1HFY22, the company has reported strong top-line and bottom line growth. However, the company’s EBITDA margin was volatile. The overall financial number looks good.
- Comparison with peer
Among the listed peers are Marico India and HUL. In terms of valuations, the post-issue TTM PE works out 37.6x (at the upper end of the issue price band).
Adani Wilmar commands strong market leadership. The same has facilitated the company to source raw materials from top global suppliers from the international market. It has a senior management team with over 40 years of experience in the agribusiness industry. The Adani Group’s support also adds a few positives.
On the other hand, the Wilmar group is one of Asia’s leading agribusiness groups, which was ranked the seventh-largest listed company by market capitalization on the Singapore Exchange as of September 2021. Adani Wilmar will come face to face with a prominent player – Gemini Edibles, the world’s second-largest palm oil plantation company, which is planning to launch an IPO and raise around ₹25 bn.
- Growth Strategy
The company will increase its market share in the edible oils segment and expand the food business. In volume terms, edible oils contribute around 65% to the company’s business. The remaining comes from food and industrial essentials segments. Adani will also focus on emerging as the leading packaged food and FMCG company in India, expanding its distribution network with an omnichannel approach, increasing brand awareness, bringing new products and increasing its customer base.
- Lead managers
The book running lead managers for the company are ICICI Securities, HDFC Bank, BNP Paribas, Kotak Mahindra Capital, JP Morgan, BofA Securities and Credit Suisse. Link Intime India is the registrar to the issue.
- Shareholders quota
The company has reserved about 50% of the net issue for qualified institutional buyers (QIBs), 35% for retail investors, and the remaining 15% will be allocated to non-institutional buyers. It has reserved equity shares worth up to ₹107 crore for its eligible employees.