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Adani Wilmar IPO: What latest GMP, subscription status signals about the issue

28 Jan , 2022   By : Kanchan Joshi


Adani Wilmar IPO: What latest GMP, subscription status signals about the issue

Adani Wilmar IPO (Initial Public offering) opened for subscription on 27th January 2022 and it will remain open for bidding till 31st January 2022. The public issue worth Rs3,600 crore has been subscribed 0.57 times by day one of bidding whereas its retail portion has been subscribed 0.96 times. After tepid response by bidders on first day of subscription, grey market has also given sideways response to the public issue. According to market observers, shares of Adani Wilmar are available at a premium of Rs47 in the grey market today.


Adani Wilmar IPO GMP


According to market observers, Adani Wilmar IPO grey market premium (GMP) today is Rs47, which is Rs3 higher from its yesterday's grey market premium of Rs44. However, they went on to add that tepid response to the public issue after first day of bidding, grey market has also not reacted much towards Adani Wilmar shares. They said that Adani Wilmar shares made its debut in the grey market at Rs65 premium and it has come down to around Rs45 levels in less than a week. However, they expected improvement in Adani Wilmar IPO subscription status as there are two more days left for bidding. They said that tepid response to the IPO can be attributed to the current negative sentiment at the Indian stock market as well. So, negative market sentiment is one of the major reasons for tepid response to the public issue by bidders and grey market.


What this GMP mean?


Market observers said that grey market premium is nothing but an unofficial estimate about the listing gain one can expect from the IPO on a particular date. As Adani Wilmar IPO GMP today is Rs47, it means grey market is expecting that Adani Wilmar IPO would list around Rs277 ( Rs230 Rs47), which is around 20 per cent higher from its price band of Rs218 to Rs230 per equity share.


However, stock market experts said that grey market premium should not be a deciding factor about success or failure of an IPO because it has nothing to do with the balance sheet of the company. They advised investors to look at the balance sheet and go through the minute financials of the company, which is concrete.


Speaking on what financials of the company reflect about Adani Wilmar IPO; Abhay Doshi, Founder at UnlistedArena.com said, "Adani Wilmar is one amongst the few large FMCG food companies. Their flagship brand “Fortune" is the largest selling edible oil brand in India. The offer is priced at a post-issue PE multiple of 41 based on FY21 figures. The revenues and EBITDA are growing at a CAGR (2015-2020) of 11.28 per cent and 20.65 per cent respectively. The concern of low PAT margins is addressed by focusing on value-added products and diversifying revenue streams. The distribution network of Adani Wilmar is the largest in edible oil segment." Despite tepid response on day one of subscription Abhay Doshi of UnlistedArena.com said that strong parentage may ensure good subscription to the offer.


Advising investors to subscribe Adani Wilmar IPO; Aprajita Saxena, Research Analyst at Trustline Securities said, "Company enjoys a leadership position in branded edible oil and packaged food business. Strong brand recall and broad customer reach coupled with a diversified products portfolio with market leading brands. Company is largest oleo-chemical manufacturers in India with pan India network and robust distribution infrastructure. Demographic change, increase in e-commerce reach, increasing household consumption and supportive government policies are the strong tailwinds for the FMCG company. Therefore, sentiments are positive on this edible oil stock."


Anuj Jain – Research Head, Co-founder – Green Portfolio Pvt Ltd said, ""The categories that AWL operates in account for 2/3rd of the kitchen spends of an average household and the company reaches 1/3rd of the households in India through it’s leading brand ‘Fortune’. The company commands 18.3% market share in edible oil and in a few years. At Mcap to sales of less than 1 and PE of around 36 at issue price, Adani Wilmar Ltd is a clear Buy with a suggestion to hold it for long term. As the Food and Industry Essential business will grow (where AWL has ambitious plans), the PE re-rating is imminent."


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