Adani Wilmar IPO: Size initial share sale cut to Rs 3,600 crore from Rs 4,500 crore

Edible oil major Adani Wilmar Ltd (AWL) has cut the size of its initial share-sale to Rs 3,600 crore from the Rs 4,500 crore planned earlier, people familiar with the development said on Friday.

The company, which sells cooking oils under the Fortune brand, is expected to float its initial public offering (IPO) this month, they added.

AWL is a 50:50 joint venture company between Ahmedabad-based Adani group and Singapore's Wilmar group.

Now, the IPO will comprise a fresh issue of equity shares worth Rs 3,600 crore. There will not be any secondary offering.

According to the draft red herring prospectus, it was aiming to raise Rs 4,500 crore from the market by issuing fresh shares.

The company has only reduced the portion of general corporate purposes and not reduced the core objects of the issue.

Out of the IPO proceeds, Rs 1,900 crore will be used for capital expenditure, Rs 1,100 crore will be used for the repayment of debt and Rs 500 crore in funding strategic acquisitions and investments.

When contacted to confirm the development, a company's spokesperson declined to comment.

The move to cut the IPO size is perceived to be a good move by investors as the issue size optimisation will help the company have better return of capital employed (ROCE) and return on equity (ROE).

This indicates the operating leverage and efficiency the company is able to demonstrate through minimal investment and it also suggests the revenues the company is able to churn at minimum capital employed and generate returns.

Despite the issue size reduction, the company will be flooded with high cash generation as it will repay the full long term borrowing of Rs 1,100 crore and save on interest cost and also fund the entire capex (capital expenditure) requirement through equity.

AWL, which is among the leading food FMCG companies in India with revenues of Rs 37,195 crore, plans to aggressively look at M&A (merger and acquisition) prospects in the foods space. The company may acquire a brand or a company engaged in foods, staples and value-added product categories.

Currently, six Adani group companies are listed on domestic bourses. Apart from Adani Enterprises, other listed ones are Adani Transmission, Adani Green Energy, Adani Power, Adani Total Gas, and Adani Ports and Special Economic Zone.