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Adani Wilmar Ltd

Incorporated in 1999 as a joint venture between Adani Group and the Wilmar Group, Adani Wilmar Ltd (AWL) is an FMCG food company offering most of the essential kitchen commodities for Indian consumers, including edible oil, wheat flour, rice, pulses, and sugar. Company’s portfolio of products spans across 3 categories: (i) edible oil, (ii) packaged food and FMCG, and (iii) industry essentials. They have presence across a wide array of sub-categories within each of these 3 categories. A significant majority of their sales pertain to branded products accounting for approximately 73% of their edible oil and food and FMCG sales volume for the financial year 2021.

Positives: (a) Diversified product portfolio with leading brands catering to most daily essentials of an Indian kitchen (b) Strong brand recall and broad customer reach (c) AWL has strong manufacturing capacity with 22 manufacturing units in India (d) AWL has the largest distribution network among all branded edible oil companies in India with 5,590 distributors.

Investment concerns: Volatility in raw material prices and increase in competition could impact the profitability of the company.

Outlook & Valuation: In terms of valuations, the post-issue TTM P/E works out to 37.6x (at the upper end of the issue price band), which is reasonable considering AWL’s historical top-line & bottom-line CAGR of ~13% and ~39% respectively over FY19-21. Further, Adani Wilmar has strong brand recall, wide distribution, better financial track record and healthy ROE. Considering all the positive factors, we believe this valuation is at reasonable levels. Thus, we recommend a subscribe rating on the issue.

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