Shares of Adani Wilmar Ltd (AWL) plunged nearly 8% on Tuesday, closing at ₹303.30, as the company’s market capitalization dropped below ₹40,000 crore. The decline followed an announcement by Adani Enterprises Ltd (AEL) regarding its exit from a 25-year joint venture with Singapore-based Wilmar International in a deal worth approximately $2 billion.
Details of the Adani-Wilmar Deal
- Stake Sale:
AEL will offload its 44% stake in AWL in two phases:- 13% Stake Sale: To meet public shareholding norms (current promoter holding is 88%).
- 31% Stake Sale: Wilmar International will acquire this stake, increasing its holding to 75% from the current 44%.
- Proceeds Utilization:
The sale proceeds will be redirected by AEL to its core infrastructure platforms, including energy, utilities, transport, and logistics. - Wilmar’s Strategy:
Wilmar International is seeking strategic investors to replace Adani’s stake and maintain the company’s growth trajectory.
Market Performance and Impact
- Stock Movement:
- Closed at ₹303.30, down 7.98% from the previous session’s close of ₹329.50.
- 52-Week High: ₹409.00
- 52-Week Low: ₹246.05
- Market Capitalization:
Dropped below ₹40,000 crore during Tuesday’s trading session.
Analyst Views and Price Targets
JP Morgan
- Rating: Underweight
- Target Price: ₹320
- Reasoning:
- Strengths: Significant sourcing, supply chain, and scale advantages.
- Valuation: Pegs edible oil business at 12x EV/Ebitda and food business at 3x EV/revenue.
- Believes the current valuation adequately reflects the company’s franchise strength.
Investec
- Rating: Hold
- Target Price: ₹397
- Reasoning:
- Views single promoter ownership positively.
- Expects the transaction to complete within 12 months.
- Highlights stable and professional management with minimal expected changes in the board.
Adani Wilmar: Business Overview
Adani Wilmar, a leading player in the edible oils and food processing industry, enjoys strong sourcing and supply chain advantages due to its scale. However, the company faces challenges, including high volatility in the edible oil market and the ongoing restructuring of promoter ownership.
Investment Outlook
The exit of AEL from Adani Wilmar signals significant restructuring, with mixed implications for investors:
- Positives:
- Enhanced public shareholding.
- Increased stake by Wilmar International, a global player with significant expertise.
- Risks:
- Uncertainty surrounding the replacement of Adani’s stake.
- Short-term volatility in stock performance.
Investors are advised to consider the long-term potential of Adani Wilmar, factoring in its robust management and market position.
Disclaimer: The information in this article is for informational purposes only and should not be construed as investment advice. Please consult a qualified financial advisor before making investment decisions.
Click here to know more.