Adani Wilmar IPO Analysis & Review

Review :-

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About Adani Wilmar :-

Adani Wilmar is a joint venture between the Adani Group and the Wilmar Group. Adani Wilmar is an FMCG food firm that provides most of the key kitchen commodities for Indian customers, such as edible oil, wheat flour, rice, lentils, and sugar. In addition, the firm provides a wide range of industry necessities such as oleochemicals, castor oil and its derivatives, and de-oiled cakes. The company’s goods are available under a variety of names and at a variety of price points, catering to a wide range of client groups.

The product line of the firm is divided into three categories: edible oil, (ii) packaged food and FMCG, and (iii) industry necessities. The company’s flagship brand, “Fortune,” is the best-selling edible oil brand in India. In accordance with this, the firm has recently concentrated on value-added goods and released items such as edible oil products, rice bran health oil, fortified meals, ready-to-cook soya chunks, and khichdi, among others. As of March 31, 2020, the firm has excellent raw material sourcing capabilities and was India’s top importer of crude edible oil.

As of the date of this Draft Red Herring Prospectus, the firm runs 22 facilities in 10 Indian states, with 10 crusher units and 18 refineries. With a capacity of 5,000 MT per day, the company’s refinery at Mundra is one of the largest single-location refineries in India. Adani Wilmar utilized 28 leased tolling units for extra manufacturing capacity as of March 31, 2021, in addition to the 22 plants. The company’s distributors are spread throughout 28 states and 8 union territories in India, serving approximately 1.6 million retail outlets.

Competitive Advantages:

  • Diversified product selection with prominent brands catering to the majority of an Indian kitchen’s everyday need.
  • Strong brand memory and a large consumer base.
  • India’s market leader in branded edible oil and packaged food.
  • One of India’s major fundamental oleochemical producers.
  • Capabilities for acquiring raw materials from top worldwide vendors.
  • An integrated company model with a strong production capability and a well-established operational infrastructure.
  • A strong distribution infrastructure supports a pan-India distribution network.
  • Priority should be given to environmental and social sustainability.
  • Professional management and an experienced board of directors.

Key Points:

– FMCG food company.

– offers most of the primary kitchen commodities – edible oil, wheat flour, rice, pulses, and sugar (such commodities account for ~66% spend on primary kitchen commodities in India).

– Many brands across a broad price spectrum.

– JV of Adani Group and Wilmar Group, one of Asia’s leading agribusiness groups (listed on SGX)

– The largest exporter of castor oil/castor oil derivatives, among the 5 largest exporters of oleochemicals in India (FY21)

Some Numbers –

– 6MFY22 – 22 plants in India across 10 states (10 crushing units, 19 refineries)
– 5,590 distributors (non-exclusive basis)
– Distributors – 28 states + 8 UTs , catering to 1.6+ million retail outlets

– 88 depots | ~1.8 mn sq f
– Online reach to be 100 cities from current 25

Three Main business categories –

#1 – edible oils (soya, palm, sunflower, groundnut, cottonseed, mustard, rice bran, specialty fats)
#2 – Foods (wheat flour, basmati rice, soya nuggets, pulses, besan, personal hygiene products)
#3 – industry essentials (de-oiled cakes, oleochemicals, castor oil/derivatives)

Note – 6MFY21 edible oils business accounted for 83% of their total revenue!

Brands –

Flagship brand – Fortune
Others – King’s, Bullet, Raag, Avsar, Jubilee, Fryola, Alife, Alpha, and Aadhaar

Issue Details –

Pure Fresh issue – Rs 3600 cr
MCap Post listing – Rs 30000 cr

Objects of Issue –

Capex, Acquisitions, debt repayment

Raw Materials –

– Unrefined soybean oil from Argentina & Brazil
– unrefined sunflower oil from Ukraine and Russia
– Palm oil from Indonesia and Malaysia.
– Wheat, paddy & oilseeds domestically, either directly from farmers or through agents acting on behalf of them

Risks –

– Commodity hedging losses of 2000 cr in the past 30 months (2 FY + 6M period)
– Wafer-thin margins of the business
– Foods business is heavily contested with many competitors in it
– Lots of private branding and unorganized sector players in edible oils

Peers

Not a directly comparable one but just take a look at the companies and their products.

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