- Date : 15/02/2022
- Read: 3 mins
Adani Wilmar IPO: What is the experts' opinion
Adani Wilmar is a joint venture between Wilmar and Adani Group and is one of the top 10 FMCG companies in India. It offers its products in three categories - edible oil, essentials for industry, and packaged food.
An IPO of Rs 3,600 crore was conducted with a share price of Rs 230 per share (price range of Rs 218 to Rs 230). In addition to capital expenditures, the company plans to repay/ prepay borrowings worth Rs 1,059.9 crore and invest Rs 450 crore in strategic acquisitions and investments.
Post-IPO, two promoters, Adani and Wilmar, will hold equal shares in the company and have a public shareholding of 12%.
What did analysts say, and what was the response?
The post-issue P/E works out to 37.6x at the upper end of the issue price band. It is reasonable considering Adani Wilmar's historical profit and revenue CAGR of around 13% and around 39%, respectively, over FY19-21. In addition, almost all analysts have given the stock a buy rating.
The issue opened on January 27 and closed on January 31. This IPO attracted a good response from both investors and potential investors, with the IPO getting subscribed 17 times overall. The retail portion got subscribed 3.92 times, while qualified institutional buyers and high net-worth individuals got subscribed 5.7 times and 56.3 times, respectively.
Overview of its financials
Revenue growth has been good for the company, as well as its topline. The revenue increased from Rs 28,797 crore in FY19 to Rs 37,090 crore in FY21. The net profit increased from Rs 376 crore in FY19 to Rs 728 crore in FY21. The average EPS and RoNW for the last three financial years are 4.56% and 19.26%, respectively. Post-issue implied market cap for Adani Wilmar was between Rs 28,528 crore and Rs 29,900 crore.
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Listing of Adani Wilmar
As mentioned above, the issue price was Rs 230, and it opened at a lower price on February 8. Bombay Stock Exchange (BSE) opened at Rs 221, while National Stock Exchange (NSE) opened at Rs 227. The tepid listing of Adani Wilmar was mainly because of the weak market sentiments overall. At the time that the company got listed, the SENSEX was down by more than 300 points.
The tepid listing allowed investors to buy the stock below the issue price, triggering the rally. The stock hit the upper circuit for the next two days, even on Friday touching its all-time high of Rs 419.90 per share. The stock closed at Rs 379.50, down 1.75% on Friday.
Also Read: IPO Exit Strategies To Optimise Your Gains
Expert opinion – What should investors do now?
Reliance Securities opine that investors who have bought shares post-allotment or received them through IPO allocation should hold them. The firm that invested in Adani Wilmar is a long-term play, as Adani Wilmar is a leading player in its segment with strong potential. It is well-positioned to gain the expected growth in this industry due to its outstanding product mix, robust distribution network, established brand name, varied client base, and proven financial performance.
IIFL securities have said that it should sustain Rs 300 levels on the technical front. Investors who still hold Adani Wilmar shares should hold the counter with a trailing stop loss at Rs 268 for near term target of Rs 325 to Rs 330. Investors should note that the target is already achieved