Adani Wilmar IPO opens today: Should you subscribe to the issue?

The initial public offer (IPO) of edible oil major Adani Wilmar Ltd (AWL) will open today. The Adani Group firm has already collected Rs 940 crore from anchor investors. It plans to raise Rs 3,600 crore through the IPO. The issue will close on January 31.

AWL is a 50:50 joint venture company between Ahmedabad-based Adani group and Singapore's Wilmar group. The company, which sells cooking oils under the Fortune brand, cut its IPO size to Rs 3,600 crore from the Rs 4,500 crore planned earlier.

The company has decided to allocate around 4.09 crore equity shares to anchor investors at  Rs 230 apiece, aggregating the transaction size to  Rs 940 crore.

Government of Singapore, Monetary Authority of Singapore, Societe Generale, Jupiter India Fund, HDFC Mutual Fund (MF), Nippon India MF and Aditya Birla Sun Life MF are among the anchor investors.

Also read: Investors lose Rs 21 lakh crore as Sensex tumbles 4,500 pts in seven sessions

The public issue comprises a fresh issue of equity shares and there will not be any secondary offering. The IPO has a price band of Rs 218-230  per  share. The IPO proceeds will be used for capital expenditure, repayment of debt and funding strategic acquisitions and investments.

Also read: Stock Market LIVE: Sensex tanks 1000 pts, Nifty below 17k; Titan slips 4%

Half of the issue size has been reserved for qualified institutional buyers, 35 per cent for retail investors and the remaining 15 per cent for non-institutional investors.

Lot size of the Adani Wilmar IPO is 65 shares for which one will have to spend Rs 14,950. A retail individual investor can apply for up to 13 lots or 845 shares by spending Rs 194,350.

ICICI Securities, HDFC Bank, BNP Paribas, Kotak Mahindra Capital, JP Morgan, BofA Securities and Credit Suisse are the book running lead managers to the issue.

Here's a look at what brokerages said about the prospects of the IPO.

Angel One: Subscribe

"In terms of valuations, the post-issue TTM P/E works out to 37.6x (at the upper end of the issue price band), which is reasonable considering AWL's historical top-line & bottom-line CAGR of 13% and 39% respectively over FY19-21. Further, Adani Wilmar has strong brand recall, wide distribution, better financial track record and healthy ROE. Considering all the positive factors, we believe this valuation is at reasonable levels. Thus, we recommend a subscribe rating on the issue," said the brokerage.

Marwadi Shares and Finance: Subscribe

"Considering the TTM (Sept 21) EPS of Rs 6.12 on a post-issue basis, the company is going to list at a P/E of 37.56x with a market cap of Rs.298,986 mn whereas its peers namely Nestle and Britannia Industries are trading at PE of 81.6x and 54.7x. We assign a 'Subscribe' rating to this IPO as the company is a leading consumer product company in India with leadership in branded edible oil and packaged food business. Also, it is available at a reasonable valuation as compared to its peers," the brokerage said.

Choice Broking: Subscribe

"At higher price band of Rs 230, AWL is demanding a P/E multiple of 37.5x (to its TTM earning of Rs. 6.1), which is at discount to peer average of 57.6x. Its edible oil business is likely to have a secular growth trend, but there is a huge untapped market for its Food & FMCG business segment. Thus considering the above observations, we assign a "SUBSCRIBE" rating for the issue," said  Choice Broking.

AWL, which is among the leading food FMCG companies in India with revenues of  Rs 37,195 crore, plans to aggressively look at M&A (merger and acquisition) prospects in the foods space. The company may acquire a brand or a company engaged in foods, staples and value-added product categories.

Currently, six Adani group companies are listed on domestic bourses. Apart from Adani Enterprises, other listed ones are Adani Transmission, Adani Green Energy, Adani Power, Adani Total Gas, and Adani Ports and Special Economic Zone.