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Adani Wilmar IPO opens for subscription: Can it cook up a fortune for your portfolio?

27 Jan , 2022   By : monika singh


Adani Wilmar IPO opens for subscription: Can it cook up a fortune for your portfolio?

New Delhi: The initial public offering (IPO) of Adani Wilmar Ltd (AWL) opened for subscription on Thursday, January 27. The company will offload its shares in the price range of Rs 218-230 apiece. The Rs 3,600 crore IPO comprises fresh issue of new equity shares of face value of Re 1 each.

Investors can bid for a minimum of 65 equity shares and in multiple of 65 thereof. The issue can be subscribed till January 31, Monday.
Majority of the brokerages are positive on the issue and have suggested investors to bid for the IPO citing its reasonable valuations, growth plans for the future, robust product line, sound balance sheet and strong parentage.

Marwadi Shares and Finance said that the company is going to list at a PE of 37.56 times with a market cap of Rs 29,898.6 crore whereas its peers, namely Nestle and Britannia Industries, are trading at PEs of 81.6x and 54.7x, respectively.
"The company is a leading consumer product company in India with leadership in branded edible oil and packaged food business," said the brokerage with a subscribe rating. "It is available at a reasonable valuation as compared to its peers."

Adani Wilmar has allocated 4.09 crore equity shares to anchor investors at Rs 230 apiece, aggregating the transaction size to Rs 940 crore, according to a circular uploaded on the BSE website.
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.

The company is a top player in large categories of soya oil and mustard oil, Reliance Securities said in its IPO note. It said that Adani Wilmar continues to focus on sustainability and with a professional and experienced board, it looks to grow over the years.
Given the differentiated product portfolio, leading market position and extensive distribution network, decent financials, likely margin improvement from current levels and valuation comfort compared to peers, the brokerage chose to gave Adani Wilmar IPO a 'subscribe' rating.

Adani Wilmar is a 50:50 joint venture between Gautam Adani's Adani group and Singapore-based Wilmar group. It sells cooking oils and some other products under the Fortune brand.
Angel One believes the valuations of the company are reasonable with a strong brand recall, wide distribution, better financial track record and healthy ROE. Considering all the positive factors, it suggested to subscribe to the issue.

The company aims to mobilize the net proceeds from the issue to fund for capital expenditure worth Rs 1,900 crore, pay borrowings worth Rs 1,059 crore, funding M&A and general corporate purposes.

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, said Choice Broking with a subscribe rating.

The company's focus on growth of FMCG and packaged food business and shift to value added products will result in increasing market share and expansion of margins, said brokerage firm KR Choksey.
The company plans to pay off its long-term debt from IPO proceeds. It has been able to generate strong cash flow which, along with reduction in debt, will further strengthen its balance sheet.

"We believe AWL is in a sweet spot to take advantage of the prevailing opportunities and can grow multifold," said the brokerage firm with a 'subscribe' rating for long term gains on the issue.
Adani Wilmar’s majority of revenues is generated from edible oils followed by industrial essentials such as castor oil and oleochemicals. Its partnership with Wilmar gives it a competitive edge in sourcing palm oil.

The company is looking to expand its products further within the foods and edible oil segment. As the disposable incomes of the population have risen, the shift towards branded products has been prominent.
"It will be at advantage of the similar trend within the food business as witnessed in edible oil due to its higher brand recall thereby expanding margin as it penetrates more in value added products," said Canara Bank Securities with subscribe rating for listing as well as long term gains.

The company clocked a profit after tax (PAT) of Rs 727.65 crore in the financial year 2021-22, 58 per cent higher than the PAT of Rs 460.87 crore in the year ago period. The revenue of the company zoomed 25 per cent to Rs 37,195.66 crore from Rs 29,766.99 crore in the year ago period.


For the period ended on September 30, 2021, the company reported a net profit of Rs 357.13 crore against a revenue of Rs 24,957.29 crore.

It has a presence in a wide array of products and is among the top five fastest growing packaged food companies in India, based on revenue growth in the last five years, said BP Wealth in its pre-IPO note with a subscribe rating.
"The company has strong financial performance and plans to become the leading packaged food and FMCG company in India by expanding through an omni-channel approach, creating brand awareness and launching new products," it added.

50 per cent of the net issue is reserved for qualified institutional buyers (QIBs), whereas non institutional buyers will have 15 per cent shares allocated for them. Retail portion has been fixed at 35 per cent of the IPO.

The company has cemented its market leadership in the edible oil industry in India and has consistently been churning profits since FY19, said Arihant Capital with a recommendation to 'subscribe' to the issue.

"The company has a promising growth trajectory enforced by its capable management and constant product innovation," the brokerage firm added.
Kotak Mahindra Capital, JP Morgan India, BofA Securities India, Credit Suisse Securities (India), ICICI Securities, HDFC Bank and BNP Paribas are the book running lead managers to the issue. Link Intime India has been appointed as registrar to the IPO. The equity shares of the company will be listed on both BSE and NSE.


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