Adani Wilmar Limited IPO. Is it Worth Subscribing?

Business Introduction:

Adani Wilmar is a fast-moving consumer goods (FMCG) food company, founded in 1999 as a joint venture between the Adani Group and the Wilmar Group. The firm offers the majority of important kitchen commodities to Indian customers, including edible oil, wheat flour, rice, pulses, and sugar. 

Additionally, the firm offers a varied range of industry-standard products, such as oleochemicals, castor oil and its derivatives, and de-oiled cakes. The company’s goods are marketed under a varied range of names and are available at a range of price points to appeal to a variety of client segments.

The firm has 22 operations in ten states across India, including ten crusher units and nine refineries. With a daily capacity of 5,000 MT, the company’s refinery at Mundra is one of the largest single-location refineries in India. 

In addition to the 22 plants, Adani Wilmar utilized 36 leased tolling units for extra manufacturing capacity as of September 30, 2021.

Distributors of the firm are located in 28 states and eight union territories throughout India, serving over 1.6 million retail outlets. As of September 30, 2021, the firm operated 88 depots in India, totaling over 1.8 million square feet of storage capacity.

Adani Wilmar Limited Business Segments:

Companies Business Segments is divided into 3 parts,

1. Edible Oil under the brand name “Fortune Oil.
2. Packaged Food and Other FMCG products.
3. Industry Basics.

Fortune, the company’s flagship brand, is India’s most popular edible oil brand. Recently, the firm has shifted its attention to value-added products, including edible oil products, rice bran health oil, fortified meals, ready-to-cook soya chunks, and khichdi, among others.

As of March 31, 2021, the firm has significant raw material sourcing capabilities and was India’s top importer of crude edible oil.

About Founders & Promoters:

The firm is promoted by Adani Enterprises Limited, Adani Commodities LLP, and Lence Pte. Ltd.

Promoters Holdings Pre-IPO was at 100% and Post IPO, the same to be reduced to 87.92%

Adani Wilmar Limited IPO Details:

Use of IPO Proceeds:

1. Capital expenditures for the expansion of current manufacturing facilities.
2. The development of new manufacturing facilities. 
3. Borrowing repayment or prepayment.
4. Providing capital for strategic acquisitions and investments, and 
5. Providing capital for overall company goals.

Financial Information:

The firm reported a net profit of Rs 357.13 crore for the half-year ended Sept. 30, 2021, and revenue from operations of Rs 24,874 crore. It finished the term with an Ebitda margin of 3.2 percent.

Adani Wilmar Limited intends to diversify its operations by entering the market for branded value-added food goods, which will help boost its profits.

The business is expected to list at a price-earnings ratio of 37.56 times its market capitalization of Rs 29,898.6 crore, compared to its rivals, Nestle and Britannia Industries, which are trading at PE ratios of 81.6x and 54.7x, respectively.

Adani Wilmar Limited had a profit after tax (PAT) of Rs 727.65 crore in the financial year 2021-22, up 58% from the previous year’s PAT of Rs 460.87 crore. The company’s sales increased 25% year on year to Rs 37,195.66 crore from Rs 29,766.99 crore in the prior-year quarter.

Adani Wilmar Limited declared a net profit of Rs 357.13 crore for the fiscal year ended September 30, 2021, on sales of Rs 24,957.29 crore.

Adani is a market leader in India’s consumer products sector, having a dominant position in the branded edible oil and packaged food sectors.

The company is reasonable, with a good brand recall, widespread distribution, a robust financial history, and a decent return on equity.

The company’s strategy of expanding its FMCG and packaged food businesses and diversifying its product portfolio will result in increased market share and profit expansion.

SWOT – Risk Analysis:

Opportunity & Strength 

1. Diversified product selection with prominent brands covering the majority of everyday kitchen necessities in India.
2. Brand recall is high, and the client base is large.
3. In India, we are the market leader in branded edible oils and packaged foods.
4. One of India’s major producers of basic oleochemicals.
5. It is capable of getting raw materials from leading worldwide sources.
6. An integrated business model built on a strong operational foundation and manufacturing capabilities.
7. A distribution network covering the whole country is backed up by a powerful distribution infrastructure.
8. Sustainability in the environmental and social spheres is a priority.
9. Professional management and a seasoned board of directors.

Weakness & Threat

1. Adani Wilmar’s activities are dependent on a steady supply of raw materials such as unprocessed palm oil, soyabean oil, and sunflower oil, as well as wheat, rice, and oilseeds. The Company does not have long-term supply agreements for its raw materials, and any rise in the cost or shortage of such raw materials might have a negative impact on its results of operations. 
2. Seasonal changes could also cause fluctuations in the results of operations.
3. Adani Wilmar is heavily reliant on imported raw materials and finished goods in addition to domestic supplies, and a variety of factors may result in an insufficient supply of raw materials and finished goods or an increase in its costs associated with obtaining sufficient raw materials and finished goods to meet the operational requirements.
4. Other nations’ import restrictions on the products might have a substantially detrimental effect on the company, financial position, and operating results.
5. Adani Wilmar is exposed to business risks inherent in the palm oil and soy oil sectors, which may have a negative impact on its operations.

Management Analysis:

Adani Wilmar Limited strives to be India’s top FMCG company by providing superior food products and services at an affordable price. The company is already a household brand with multiple products under its belt.

The company is equipped with top-class management who are well experienced in the industry. 

Industry Overview:

India has a high share of the domestic consumption base. In FY 2020, India’s consumption to GDP spending was at over 60%. India’s domestic consumption has grown at a CAGR of 11.1% between FY 2014 and FY 2019, compared to 4.3% and 8.2% in the United States and China, respectively. 

A growing base of young consumers, aggressive urbanization coupled with a growing share of the middle-class population, and Nuclearziation of households will all lead to a better market for the entire FMCG industry.

Adani Wilmar Limited is at the core of this demographic change and is at the right spot to monetize its well-established product portfolio. 

Conclusion:

Adani Wilmar Limited offers a wide range of FMCG and other products. It’s a household brand with the capability of becoming one of the top 3 largest and finest FMCG companies in India. 

The financials of the company is reasonably good for an IPO that’s going public around these days. And, valuations are also comfortably priced.

This company would not only provide a wonderful IPO listing premium, (expecting at least 40% gains). But, will also be a great addition to one’s portfolio from a long-term perspective.

Will I Subscribe to this Adani Wilmar Limited IPO?

Adani Wilmar Limited is a market leader in a number of soya and mustard oil categories. The company is committed to sustainability and, with a skilled and experienced board of directors, expects to grow in the coming years.

Given the company’s distinct product range, market leadership position, wide distribution network, solid financials, potential margin expansion from present levels, and relative value comfort in comparison to peers, I would assign a favorable rating.

Yes, I’ll subscribe to this IPO from all my available DEMAT accounts. And if I get the subscription, the company will stay in my core portfolio for a very long term.

How to Apply for Adani Wilmar Limited?

Steps to be followed to apply for “Adani Wilmar Limited” via Zerodha console:

Step 1: Visit the Zerodha website and log in to Console.

Step 2: Go to Portfolio and click the IPOs link.

Step 3: Go to the “Adani Wilmar Limited” row and click the ‘Bid’ button.

Step 4: Enter your UPI ID, Quantity (In lots), and Price.

Step 5: ‘Submit’ IPO application form.

Step 6: Visit the UPI App (net banking or BHIM) to approve the mandate.

Do not have a brokerage account? Apply for Zerodha – India’s top brokerage service.

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Disclaimer: All the information on this website is published in good faith and for general information purposes only.

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