Adani Enterprises (AEL) recently announced a complete exit of its 44% stake in Adani Wilmar (AWL), expecting to raise approximately $2.2 billion or ₹18,817 crores from the deal.
Following the announcement on Monday, 30th December 2024, shares of Adani Enterprises spiked by 7% to close at ₹2,585. However, Adani Wilmar’s stock declined by 1.8%, settling at ₹323.25 per share.
Adani Selling its stake in Wilmar - How is the deal structured?
The Adani Wilmar stake sale will be executed in two phases:
Phase 1: Lence Pte Ltd will acquire up to 31% of AWL’s shares. Adani Enterprises and its wholly-owned subsidiary, Adani Commodities LLP (ACL), have entered into this agreement with Lence Pte Ltd, a fully-owned subsidiary of Wilmar International.
Phase 2: Adani Enterprises will reduce around 13% of its shares in AWL to meet public shareholding norms.
Wilmar will acquire the remaining 31% stake, which will increase its holding to nearly 75% from the current 44%.
The Wilmar stake deal will mark Adani Enterprises’ complete exit from its stake in the fast-moving consumer goods (FMCG) business. Adani Enterprises aims to redirect the proceeds toward strengthening its core infrastructure platforms, including energy, utilities, transport, and logistics.
All you need to know about Adani Wilmar and Wilmar International
Established as a joint venture between the Adani Group and the Wilmar Group in 1999 in Ahmedabad, Adani Wilmar is India’s leading producer of cooking oil, wheat flour, pulses, rice and sugar. The company owns 23 factories in 10 Indian cities.
For 2023-24, Adani Wilmar posted a turnover of ₹51,262 crore and held the largest market share in the edible oil sector. Its flagship brand, Fortune, had annual brand sales exceeding ₹20,000 crores, according to the company’s annual report.
Wilmar International Limited, founded in 1991 and headquartered in Singapore, is today Asia’s leading agribusiness group. Wilmar is ranked amongst the largest listed companies by market capitalisation on the Singapore Exchange.
Wilmar’s business activities include oil palm cultivation, oilseed crushing, edible oils refining, flour and rice milling, sugar milling and refining, manufacturing of consumer products, ready-to-eat meals, central kitchen products, biodiesel and fertilisers as well as food park operations.
What are Adani Wilmar Products?
A pan-India player, Adani Wilmar has a reach of over 121 Million households in India. With over two decades of trust, AWL’s diversified product portfolio includes edible oils, Industrial Essentials, Food and FMCG.
Adani Wilmar’s Fortune brand is the number one seller for the following edible oils in India:
- Soybean Oil
- Mustard Oil
- Rice Bran Oil
Additionally, Fortune is also a market leader across categories like wheat, rice, soya products and more. Adani Wilmar has a market share of ~1.5x of its next competitor. (as per company reports from November 2024)
FMCG Competitors for Adani Wilmar
Despite AWL’s strong market presence, it faces considerable competition from established brands and emerging players like:
1. ITC Limited - Aashirvaad (flour and spices) and Sunfeast (biscuits and snacks)
2. Hindustan Unilever Limited - Kissan (sauces and jams) and Knorr (instant soups)
3. Ruchi Soya Industries (Now Patanjali Foods)
4. Marico Limited - Saffola
5. Emami Limited - Healthy & Tasty and Himani Best Choice.
While Adani Wilmar faces competition from both domestic and international players, it remains a key contender in India’s FMCG space.
Adani Wilmar’s Financial Overview
As on 2nd January 2025, Adani Wilmar has a market capitalization of approximately ₹42,720 crores. The company’s Price-to-Earnings (P/E) ratio stands at 40.75, indicating investor expectations for future growth despite recent challenges. The company's returns have declined 10.3% during the last 12 months.
The Earnings Per Share (EPS) for the trailing twelve months (TTM) is reported at ₹8.10. Notably, Adani Wilmar has experienced a sales decline of -10.89%, with profit growth decreasing by -54.19%, raising concerns about operational efficiency.
Strengths and Weaknesses of the AWL Share
Strengths:
- Lence Pte. Ltd will now own 75% of AWL which will result in more focus from the parent company.
- AWL has a dominant position in the Edible oil market in India with 19% market share. It has a potential to increase market share further as ~50% share is with regional players.
- AWL Edible oil business is extremely profitable and generates ₹25 for every ₹100 of investment.
- AWL has a strong brand presence with its leadership across FMCG categories.
Weaknesses:
- Adani Wilmar’s P/E ratio of 39.75 may suggest overvaluation relative to earnings growth.
- The declining sales growth of -11.9% in FY 23-24 raises concerns about future revenue generation for AWL.
- AWL Food & FMCG business is still in the investment phase which has reduced the company's profitability metrics.
- The company’s ROCE (Return on capital employed) has gone down from 15% to 10% which suggests that the company might not be able to use its capital efficiently.
Conclusion
The Adani Wilmar stake sale is a significant moment in the FMCG sector, with impact for both companies involved. While the sale provides Adani Enterprises with much-needed liquidity to strengthen its financial position, Wilmar International’s increased ownership to 75% could bring a sharper focus to its operations in India. As of now, this appears to be a win-win for both parties.
For investors who’ve invested in AWL or other Indian stocks- it’s crucial to not make decisions driven by market volatility or panic. Instead, one must stick to carefully evaluating stock fundamentals, broader market conditions, and long-term prospects before making any investment choices.
Frequently Asked Questions about Adani Wilmar Stake Sale
Why is Adani exiting Wilmar?
Adani Enterprises (AEL) is exiting its 25-year-old joint venture with Wilmar International by selling its 44% stake in Adani Wilmar Limited (AWL). This exit is to align with Adani's broader efforts to streamline its portfolio and focus on core infrastructure and energy businesses. The stake sale is expected to provide Adani Enterprises with much-needed liquidity, which can be redirected to other high-priority ventures or debt reduction.
For Wilmar International, acquiring a 75% ownership in AWL brings with it greater control and a more focused approach to expanding its operations in India's fast-growing FMCG sector.
This appears to be a mutually beneficial decision, as Adani can strengthen its financials while Wilmar sharpens its market strategy.What will happen to Adani Wilmar’s shareholders?
It is unlikely for Adani Wilmar’s shareholders to experience any direct changes in ownership stakes or rights as a result of the stake sale by Adani Enterprises.
However, the sale could bring with it share price volatility or further changes in shareholding pattern. Investors should monitor company announcements and the news regularly before making any investment decisions.What was the first share price of Adani Wilmar?
The first share price for Adani Wilmar was ₹221 on NSE and ₹227 on BSE. AWL was first listed on the Indian stock exchanges (NSE and BSE) on 8th February 2022. The company's shares debuted at an issue price of ₹230 per share during its Initial Public Offering (IPO). However, the stock marked a slight discount to its IPO price on listing day.
Since its launch, the AWL stock has seen significant movement driven by the company’s performance and broader market factors.
What is the share-holding pattern of Adani Wilmar?
Following Adani Enterprises’ announcement to sell its 44% stake in Adani Wilmar, Lence Pte Ltd, a fully-owned subsidiary of Wilmar International is expected to increase its ownership to 75%, marking a significant shift in the company’s structure and operational control.
As of now, the remaining stake lies with FPI’s, DII’s, Retail and HNI stakeholders. For the most updated details on Adani Wilmar’s shareholding pattern, refer to official filings and disclosures from the company.Is Adani Wilmar in debt?
Yes, according to the 2023-24 annual report, AWL has a total borrowing of ₹2,173 crores, which is considered typical for companies operating in capital-intensive sectors like FMCG.
AWL is known to utilize debt strategically to fund its operations, expand its manufacturing capacities, and drive growth. It's essential to note that Adani Wilmar maintains a manageable debt-to-equity ratio, indicating careful and cautious financial management.
Disclaimer
This blog is for general/educational information purposes and is no way to be considered as advice, or recommendation for investment or otherwise.
Investment in securities market are subject to market risk, read all the documents carefully before investing. The securities quoted are exemplary and not to be considered as any kind of advice or recommendation. The past performance of the stocks are not necessarily indicative of future performance. INDmoney Private Limited 616, Level 6, Suncity Success Tower, Sector 65, Gurugram, 122005, SEBI Stock Broking Registration No: INZ000305337, Trading and Clearing Member of NSE (90267, M70042) and BSE, BSE StarMF (6779), SEBI Depository Participant Reg. No. IN-DP-690-2022, Depository Participant ID: CDSL 12095500
Sources
Adani Wilmar, screener (as on 2nd January 2024)