CASELET

ON
THE IPO OF ADANI WILMAR LIMITED

By,
Ashwini Singh – 21BSP1192
Ankita Singhania – 21BSP1186
Parth Saboo – 21BSP1220

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 INTRODUCTION
Adani Wilmar is a joint venture incorporated in 1999 between the Adani Group, which is a
multinational diversified business group and Wilmar Group, one of Asia’s leading agribusiness
groups. It is one of the few large FMCG food companies in India to offer a wide array of
packaged foods, including edible oil, wheat flour, rice, pulses, besan, soya chunks, ready-to-cook
khichdi and sugar, under a diverse range of brands to cater to various price points, including
Fortune, its flagship brand. It also has a number of brands catering to masses, including Bullet,
King’s, Aadhar, Raag, Alpha, Jubilee, Avsar, Golden Chef and Fryola.

ISSUE DETAILS:
Issue Date: 27th Jan’21-31st Jan’21
Price Band: ₹218-₹230
Bid Lot: 65 Shares
Issue Size: ₹3,600 cr (Fresh issue is of Rs 3600, offer for sale is NIL)
No. of Shares (Post Issue): 130.9 cr
Post-Issue Implied Market Cap*: ₹29,900 cr
P/E Ratio (FY21)*: 41.1x
* at upper price band

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 FUNCTIONAL AREA
The area that we have chosen to incorporate is the IPO Valuation. For this we are considering the
approach of, Relative Valuation it is also referred to as comparable valuation, it is a very useful
and effective tool in valuing an asset. Relative valuation involves the use of similar, comparable
assets in valuing another asset. It is based on different ratios such as price to earnings ratio, price
to book value ratio and price to sales ratio.

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 ANALYSIS
Relative Valuation calculations:
 Price to earnings ratio: To determine the value of the company, its estimated equity value
is divided by its recent net income.
Market Price per share is Rs. 230, Earning per share is PAT/No’ of outstanding shares is
727.6/130.9 = 5.56, so the ratio is 230/5.56 = 41.1
The P/E ratio of Adani Wilmar Limited is considerably higher than some of its peers like
Emami, Ruchi Soya, Patanjali, etc.

 Price to book value ratio= Market price per share/book value per share. Book Value is
Net worth/total outstanding shares which is 114 (reserves & surplus) + 3184.1 (equity) –
0 ( fictitious assets)/ 130.9 = 25.2, so the ratio is 230/25.2 = 9.1
It indicates that the stock might trade at a premium.

 Price to Sales Ratio= Market Price per share / Sales per share, Sales per share = Sales
/total number of outstanding shares which is 37090/130.9 = 283.3, so the ratio is
230/283.30 = 0.81
The ratio describes how much someone must pay to buy one share of a company relative
to how much that share generates in revenue for the company so lower this ratio the
better.

Competitive Landscapes:

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Sector Outlook:
The edible oil retail market is estimated to be ~₹1, 79,500 crore in FY20 and is expected to grow
at a CAGR of 6% in the coming 5 years. It has been growing steadily at a CAGR of 6% in the
last five years. The share of unbranded play is consistently dropping and is estimated to shrink to
~10% by FY25. The branded edible oil market is estimated to be around ₹1,56,000 crore and is
expected to grow faster than the overall category gaining a share of close to 90% of the total
market in terms of value in the coming five years. It is estimated that close to 75% of the total
edible oil available in terms of volume is retailed as a branded product. As of 31st March 2021,
the Refined Oil in Consumer Packs (ROCP) market share of company’s branded edible oil was
18.3%.

Risk Factors:
As of 30th September 2021, the company’s total outstanding borrowings stood at ₹9,235.3 crore.
Further, as of 15th January 2022, the same outstanding borrowings (on a standalone basis) was
₹10,837.4 crore. The company is dependent on the supply of large amounts of raw materials,
such as unrefined palm oil, soya bean oil and sunflower oil, wheat, paddy and oilseeds.
Predominantly, unrefined soybean oil is imported from Argentina and Brazil, unrefined
sunflower oil from Ukraine and Russia, and palm oil from Indonesia and Malaysia. Unfavorable
local and global weather patterns may have an adverse effect on the availability of raw materials.
In addition, it does not have long term agreements with its suppliers. With respect to its

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operations in India, for FY21 and 6M FYY22, 59.8% and 66.1% of the raw materials/finished
goods was imported, respectively, and the rest was obtained through domestic suppliers. In
particular, as far as Indian operations are concerned, China is its largest export market
(accounting for ₹841.4 crore, or ~51.2%) (predominantly from castor sales) out of overall export
sales of ₹1,643 crore for the 6M FY22). Any import restriction imposed by China on its products
may have a disproportionate impact on its export sales. It is the largest exporter of castor oil and
castor oil derivatives, and is among the five largest exporters of oleo chemicals in India as of
31st March, 2020 (Source: Technopak Report). Import restrictions by other countries on its
products may have a material adverse impact on the operations. The products are in the nature of
commodities and their prices are subject to fluctuations that may affect the company’s
profitability.

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 FINDINGS
Revenue from sale of products increased by 25.2% to ₹37,039.4 crore for FY21 from ₹29,586
crore for FY20, primarily due to an increase in the unit selling price of products as a result of a
surge in commodity prices in FY21. As a result, the average selling price of edible oil products
increased by 24.84%. In particular, the average selling price of palm oil increased by 32.62%,
and the average selling price of soya bean oil increased by 19.77%. Sales volume grew by only
4.01% to 4,484,175 MT for FY21 from 4,311,492 MT for FY20 due to the impact of COVID-19.
The revenue generated from top 5 products under Fortune, its flagship brand, amounted to
₹14,312.6 crore and ₹8,612.5, respectively for FY21 and 6M FY22. Company recently acquired
100% of the equity share capital in Adani Wilmar Pte Limited on 25th June 2021 for a
consideration of US$24.09 million. For 6M FY22, AWPL along with its subsidiaries contributed
a net loss of ₹6.7 crore to its net profit. Further, the difference between the purchase
consideration and the net asset value of AWPL was recorded as a goodwill in the amount of
₹56.2 crore.

Adani Wilmar is one of the few large FMCG food companies in India to offer a wide array of
packaged foods, including edible oil, wheat flour, rice, pulses, besan, soya chunks, ready-to-cook
khichdi and sugar. It intends to increase penetration in rural and semi-rural areas by launching its
massive brands, since these markets offer a significant growth opportunity for expansion. It
intends to develop its own e-commerce platforms. The company seems to be richly valued with
moderately high margins.

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 BIBLIOGRAPHY

 https://www.valueresearchonline.com/stories/50351/adani-wilmar-ipo-how-good-is-it/
 https://stockedge.com/Stocks/adani-enterprises/6614

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