Adani Wilmar IPO: Brokerages Recommend Subscribing to Fortune Brand Seller


Adani Wilmar Ltd (AWL) was incorporated in 1999 as a joint venture between Adani Group and Wilmar Group of Singapore. This product portfolio of FMCG company is divided into three different categories, (i) Edible Oil (ii) Packaged Foods and FMCG – such as Wheat Flour, Rice, Pulses and Sugar (iii) Food Essentials ‘industry.

ADL is among the five fastest growing packaged food companies in India with Fortune being its popular brand. The company has 22 manufacturing facilities, comprising 10 crushing units and 18 refineries, located in 10 Indian states.

The company plans to raise up to Rs 3,600 crore through its initial public offering (IPO), in the price range of Rs 218 to Rs 230 per share, during the offering period. From January 27 to January 31. Investors can bid for a minimum of 65 shares and in multiples thereafter.

This is a new issue of approximately 15.65 crore equity shares. After issuance, the promoters’ shareholding will drop from 100% to 87.92% (approximately 44% with Adani and Wilmar each).

The company will use proceeds from the IPO to fund capital expenditures; repayment/prepayment of loans; financing strategic acquisitions and investments; and for general corporate purposes.

The allocation of shares will be decided by February 3 and successful bidders will have the shares credited to their demat accounts by February 7. The shares will be listed on February 8. In accordance with the GMP (Grey Market Premium), the IPO can provide a listing gain of 15-20%, starting January 25.

Here’s what brokerages have to say about Adani Wilmar’s first stock sale:

KR Choksey
Rating: Subscribe

Good points :
– Changing consumer preferences towards packaged foods
– Strong brand recall across all price ranges
– Infusion of capital to support growth
– Strong research and development team

Concerns:
– Potential uncertainty on the raw material supply front
– Volatility in the foreign exchange markets
– Slowdown in rural dynamics
– Overreliance on the edible oil segment

The brokerage firm believes that AWL’s focus on growing the consumer packaged goods and packaged food business and shifting to value-added products will result in increased market share and expansion of margins. With India’s economy recovering strongly from the impact of Covid-19 and set to grow faster to become a $5 trillion economy, puts AWL in an ideal place to multiply. Therefore, the brokerage recommends ‘SUBSCRIBE’ for long-term gains.

angel one
Rating: Subscribe

Good points :
– Diverse portfolio with leading brands catering to most everyday kitchen essentials
– Strong manufacturing capability with 22 manufacturing units in India
– Largest distribution network among all branded edible oil companies in India

Concerns:
– Commodity volatility
– Increased competition could impact profitability

According to the brokerage firm, in terms of valuations, the post-issue TTM P/E (Trailing Twelve Months PE) stands at 37.6x (at the high end of the issue price), which is reasonable given AWL’s historical turnover. & net CAGR of approximately 13% and 39%, respectively. Thus, they recommend a “SUBSCRIBE” note on the question.

Brokerage of choice
Rating: Subscribe

Good points :
– Differentiated and diversified product portfolio with market leading brands
– Strong raw material sourcing capabilities
– Extensive pan-Indian distribution network
– Strong lineage with professional management and an experienced board of directors

Concerns:
– Adverse government policies and regulations
– Sustained general inflationary environment
– Fluctuations in commodity prices and exchange rates
– Unfavorable sales mix

At the upper end of the Rs 230 price range, AWL demands a P/E multiple of 37.5x, which is a discount to the peer average of 57.6x. Its edible oil business is likely to have a secular growth market, but there is a huge untapped market for its Food & FMCG business segment, according to the brokerage update. Therefore, it recommends a “SUBSCRIBE” note on usage.

HDFC Titles
Classification: Not classified

Good points :
– Complete portfolio of consumer packaged goods meeting most of the daily essentials of an Indian kitchen
– Products available on major e-commerce platforms
– Flagship brand “Fortune” has strong brand recall
– Integrated business model with well-established operational infrastructure and strong manufacturing capabilities

Concerns:
– Operations dependent on the supply of large quantities of raw materials
– Draws a significant share of revenue from the edible oil sector
Import restrictions by other countries
– The involvement of certain companies of the Adani group in various legal, regulatory and other proceedings, could have a negative impact on the activity and the reputation

Capital of Arihant
Rating: Subscribe

Good points :
– Covid has accelerated the digitization of customer interactions with hospitality and travel businesses
Score global customers with long-term relationships
– Innovative SaaS solutions driven by AI and relevant to the industry
– History of successful accelerations after acquisitions

Concerns:
– Unable to predict acquisition patterns due to demand volatility
– Inability to drive customer satisfaction to increase retention
– Lack of interoperability increases acquisition costs

Based on valuations, cemented market leadership in the edible oils segment, and consistent profitability since fiscal 2019, the brokerage firm recommends a “SUBSCRIBE” rating at the IPO, as she believes the company has a promising growth trajectory bolstered by its capable management and constant product innovation. .

Invest
Rating: Subscribe

Good points :
– Vast customer base
– Strong brand recall across a diverse price range
– Market leading position in certain essential products for the kitchen and industry
– Strong lineage with professional management and an experienced board of directors

Concerns:
– Adverse local and global weather conditions may impact raw material availability
– Absence of long-term agreements with raw material suppliers
– Involvement of certain Adani Group companies in legal and regulatory entanglements

Asit C. Mehta Company believes that AWL is well positioned to achieve the expected growth in the industry due to its outstanding product line, established brand, strong distribution network, diverse customer base and… proven financial performance. He recommends “SUBSCRIBE” to the issue for a long-term perspective.

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