Adani Wilmar Shares Fall 5% As Group Likely To Sell Stake In $6 Billion JV

FMCG player, Adani Wilmar's share price nosedived on Wednesday after reports stated that the Gautam Adani-backed Group is likely planning to sell stakes in the company. As per reports, the Group is considering offloading its 44% stake in the Mumbai-listed consumer-staple joint venture, which is valued at around $6 billion currently. On BSE, the stock has dipped by nearly 5%.

At the time of writing, Adani Wilmar shares traded at Rs 381.35 apiece, down by Rs 11.70 or 2.98% on BSE. The stock plummeted by 4.85% with an intraday low of Rs 374 apiece on the exchange.

At the current market price, the company's valuation is around Rs 49,628.23 crore (approximately $6.02 billion).

People familiar with the matter told Bloomberg that Adani Enterprises is exploring selling its stake in Adani Wilmar, which is a joint venture with Wilmar International, freeing up capital for their core business. They said that the conglomerate has been considering a potential sale of its 44% stake in Adani Wilmar for a few months.

As per Bloomberg's calculations, Adani's shares are worth about $2.7 billion at Tuesday's market price of Rs 393.05 apiece.

According to the shareholding pattern, the Group's Adani Commodities LLP shareholding is to the tune of 57,14,74,430 equity shares or 43.97% in Adani Wilmar as of June 30, 2023. The Group's flagship firm, Adani Enterprises holds 99.99% in Adani Commodities LLP, while Gautam Adani, Rajesh and Vinod Adani are identified as significant beneficial owners and indirectly collectively hold 43.97% stake in the FMCG firm.

Also, on August 8, CareEdge reaffirmed its rating on Adani Wilmar's bank facilities and commercial paper owing to its established market position in the domestic edible oil market with the leadership position of the 'Fortune' brand in the edible oil segment.

During the June 2023 quarter, Adani Wilmar posted a net loss of Rs 78.92 crore compared to a profit of Rs 193.59 crore in the same quarter a year ago. Meanwhile, the revenue from operations dipped by 12.2% to Rs 12,928.08 crore in Q1FY24, as against Rs 14,724.09 crore in Q1FY23, due to a steep decline in edible oil prices.

CARE's note said, "The steep decline in edible oil prices and moderate demand from the frying and baking industry led to stagnant sales of edible oil in absolute terms on a consolidated basis during FY23 (refers to the period April 1 to March 31) and Q1FY24."

Further, CARE's ratings continue to factor in the expansion of its distribution network, strong capital base, comfortable capital structure and strong liquidity position of AWL despite the working capital intensive nature of operations. It added, "Correspondingly, PBILDT/Ton of edible oil and consequent PBILDT margins also moderated during FY23 and further declined during Q1FY24, mainly owing to finished goods inventory piled up emanating from reduced inventory levels by stockist due to
price volatility."

Nevertheless, the rating agency said, " risk management practices of AWL led to the relatively better operating performance of AWL's edible oil segment as compared to some of other peers. Going forward, the PBILDT margins are expected to be normalised backed by volume growth in edible oil and substantial consummation of high-cost inventories. The ratings also factor in the steady growth in sales of industry essential segment as well as food and fast-moving consumer goods (FMCG) segment led by volume growth."

CARE's ratings also continue to factor in the expansion in its distribution network, strong capital base, comfortable capital structure and strong liquidity position of AWL despite working capital intensive nature of operations.

Year-to-date, Adani Wilmar's shares have plunged by 37% on BSE.