Adani Wilmar subscribed 17.37 times by the end of Day 3

Adani Wilmar Limited IPO opened for subscription on 27th January and got subscribed 17.37 times. Here are the details:

Adani Wilmar IPO Details:

Adani Wilmar Limited IPO Date: 27 January - 31 January 2022

Adani Wilmar Limited IPO Price band: Rs 218 - Rs 230

Adani Wilmar Limited IPO Issue Size: Rs 3600 crore (Initial Public Offering of equity shares aggregating up to Rs 3600 crore)

Reservation: QIB 50%, Retail - 35%, NII 15%

Post ISsue Implied Market Cap: Rs 28,528 crore - Rs 29,900 crore

Minimum Investment: Rs 14,950

Employee Discount: Rs 21 per share

Bid lot: 65 shares, and in multiples of 65 shares

Adani Wilmar IPO: Objects of the Issue

The net proceeds from the IPO will be utilized for the following purposes :

• funding capital expenditure for expansion of existing manufacturing facilities and developing new manufacturing facilities
• funding strategic acquisitions and investments
• Prepayment and repayment of borrowings and for general corporate purposes
• To achieve the benefits of listing the equity shares on the stock exchanges.

About Adani Wilmar Limited

• The company was incorporated in 1999. It is promoted by Adani Enterprises (AEL), Adani Commodities LLP (ACL), and Lence Pte Ltd (LPL).
• It is one of the few large FMCG food companies in India that offer most of the essential kitchen commodities for Indian consumers, including edible oil, wheat flour, rice, pulses, and sugar.
• The company’s portfolio of products spans 3 categories: edible oil, packaged food and FMCG, and industry essentials. 
• The company's flagship brand is 'Fortune' and it is the largest selling edible oil brand in India.
• The company has strong raw material sourcing capabilities and as of 31 March 2021, it was India's largest importer of crude edible oil.
• It offers a wide array of packaged foods since 2013, including packaged wheat flour, rice, pulses, besan, sugar, soya chunks, and ready-to-cook khichdi. They also offer a diverse range of industry essentials, including oleochemicals, castor oil and its derivatives, and de-oiled cakes.
• The company operates 22 plants located across 10 states in India, comprising 10 crushing units and 19 refineries. The company's distributors are in 28 states and 8 union territories throughout India, catering to over 1.6 million retail outlets. 

Adani Wilmar Business Vertical

• Edible Oil - The ROCP market share of AWL's branded edible oil was 18.30% as of 31 March 2021. Other than its Flagship product 'Fortune', it offers a comprehensive portfolio of edible oil products including soyabean oil, palm oil, sunflower oil, rice bran oil, mustard oil, groundnut oil, cottonseed oil, blended oil, vanaspati, specialty fats, and a range of functional edible oil products with distinctive health benefits.
• Packaged Food and FMCG - The company offers a wide array of packaged foods that include packaged wheat flour, rice, pulses, etc. They are one of the fastest-growing packaged food companies in India based on the revenue growth in the last five years. They forayed into food products in FY13 and currently offer an extensive array of food products.
• Industry Essentials - AWL offers a diverse range of industry essentials, including castor oil and its derivatives, oleochemicals, and deoiled cakes. They are one of the largest basic oleochemical manufacturers in India in terms of revenue. Also, they are the largest manufacturer of stearic acid and glycerine in India with a market share of 32% and 23%, respectively.

Adani Wilmar Industry Outlook

• The size of the soya chunks retail market in India is estimated to be at Rs 2000 crore comprising both branded and unbranded segments with an almost equal share in terms of value. 
• The growth in the branded market is expected to outpace the growth of the overall category. With a CAGR of 14%, the market estimated to be Rs 1000 crore in FY20 is expected to almost double itself in the coming 5 years.
• A number of packaged food categories such as salt and edible oil have witnessed a significant increase in the overall branded product usage. Similar trends are expected in various other large packaged food categories such as wheat flour, rice, besan, and soya chunks in the coming years.

Adani Wilmar Listed Peers

The company has a number of listed peers. The top names include Hindustan Unilever Limited, Britannia Industries, Tata Consumer Products, Dabur India, Marico, and Nestle India.

• The revenue for FY21 is highest for HUL with revenue of Rs 47,028 crore, followed by Adani Wilmar at Rs 37,195 crore.
• In terms of Earning Per Share (EPS), the list is topped by Nestle India with EPS of 215.98, followed by Britannia (77.40) and HUL (34.03). Adani Wilmar has the lowest EPS among all the listed peers.
• The PE of the overall industry is on the higher side with average EPS of around 60.
• Return on Net Worth (RoNW) is highest for Nestle (103%), followed by Britannia (51.6%). Adani Wilmar is fourth on the list with a RoNW of 22.1% for FY21.

Adani Wilmar : Financials

• It is one of those rare recently listed companies that is profitable in the last three financial years.
• The revenue from operations for FY19, FY20, and FY21 was Rs 28,797.46 crore, Rs 29,657.04 crore, and Rs 37,030.42 crore, respectively. The company has shown good revenue growth in the last financial year - a growth of Rs 25.06% which is exceptional.
• The EBITDA for the same period was Rs 1,253.46 crore, Rs 1,419.48 crore, Rs 1,430.56 crore, respectively. EBITDA in FY21 has declined marginally.
• The EBITDA margin has also declined from 4.33% in FY19 to 3.85% in FY21.
• The average EPS and RoNW for the last three financial years is 4.56 and 19.26%, respectively.

USPs

Differentiated and diversified product portfolio - The company has a wide portfolio of packaged consumer staples, including edible oil, wheat flour, rice, etc. Also, it is present in one out of three households in India with a household reach of 90.51 million through its Fortune brand as of 31 March 2021.

Leading Consumer product company - The ROCP market share of its branded edible oil was 18.30%, putting them as the dominant No. 1 edible oil brand in India. They are among the top 5 fastest-growing packaged food companies in India.

Strong raw material sourcing capabilities - The raw material sourcing capabilities of the company are supported by its market standing and extensive business networks. They import a significant portion of raw materials, and their market leadership has facilitated them to source raw materials from top global suppliers from the international markets.

Integrated business model - They operate in integrated manufacturing infrastructure to derive cost efficiency across their different business lines. Their integrated business model and strong manufacturing capabilities have led to a competitive advantage, which helps solidify their market position.

Growth Potential

Become the leading packaged food and FMCG company - The penetration rate of packaged foods in India remains low, which provides significant potential for growth for packaged edible oil and food products. AWL plans to leverage its established brand's expertise and industry trends to strengthen the portfolio of core “in the kitchen” products. They will also continue to strengthen their leading position in the edible oil market by introducing additional premium products.

Expand distribution network - They plan to expand to the distribution network to further penetrate both urban and rural areas and increase sales. They will continue to increase the coverage of their retail outlets. They have designed programs to motivate their distributors to achieve performance targets.

Increasing brand awareness - It will continue to invest in strengthening the brands in India. They plan to employ celebrity endorsement, digital advertising, and other brand-building initiatives in their marketing campaigns to increase brand awareness.

Launch new products - They plan to launch new products to capture consumer trends. They have been evaluating new products in adjacent categories, based on a set of criteria, including their ability to create a differentiated offering, competitive intensity, go-to-market capability, back-end product fitment, category, scale, and profitability of the new products.

Risks

Supply of raw material - AML's business depends on the availability of reasonably priced and high-quality raw materials in the quantities required by them. The price and availability of such raw materials depend on several factors beyond the company's control, such as overall economic conditions, production levels, etc. Also, they do have long-term agreements with suppliers for raw materials. Any increase in the cost of, or a shortfall in the availability of such raw materials could hurt their business.

Unable to manage all business categories - They offer a diverse range of products primarily in three business categories. As a result of operating such diverse businesses, the management requires considerable expertise and skill to manage and allocate an appropriate amount of time and attention to each business. If they are unable to manage their diversified operations, it will impact the business.

Significant portion of revenue from edible oil business - They derive a significant portion of their revenue from the edible oil business segment in India. For FY19, FY20, and FY21, the revenue from the edible oil segment contributed 74.80%, 79.16%, 82.23% of its revenue from operations, respectively. Any reduction in demand or temporary or permanent discontinuation of the manufacturing of edible oil products will impact its overall revenue.

Adani Wilmar IPO: Review

Adani Wilmar has reported a healthy 14% CAGR rise in revenues between FY19 and FY21, on the back of a rise in new stores. The company’s profits have also risen by a robust 40% CAGR over this period. Notably, the company has reported increasing revenues and profits every year since 2015. .
The company was able to retain its EBITDA margin in the 3-4.5% range. The company’s return ratios (RoCE and RoNW) have also been in a healthy range over the last three years. In recent years, it has been placing an increasing focus on value-added products, with an aim to diversify revenue streams. This has aided the margins of the company.

At the higher end of the price band, Adani Wilmar IPO is priced at a PE ratio of  45 times based on FY22 annualized earnings (on a fully diluted basis). This is lower than listed peers Hindustan Unilever (64 times), Britannia (54 times), Tata Consumer (95 times), Dabur (65 times), Marico (55 times) and Nestle India (82 times). Notably, the company has cut the size of its public issue to Rs 3,600 crore, from Rs 4,500 crore as planned earlier.

Given factors such as a good rise in revenues, strong profitability, healthy return ratios, healthy margins, good growth visibility, and reasonable valuations, analysts remain “Positive” on the prospects of this issue.

Subscription status as on 31st January 2022 (End of Day 3)