Adani Wilmar shares drop 5% as Adani Group mulls stake sale
Shares of Adani Wilmar fell nearly 5% in opening trade on Wednesday on the BSE amid a report that Adani Enterprises is considering a stake sale in its fast-moving consumer goods (FMCG) joint venture with Wilmar International Ltd. The Adani Group’s flagship company is exploring an option to sell its entire 43.97% shareholding in the edible oil major, which is expected to be worth about $2.7 billion at the current share price. The move is being seen as part of the port-to-power conglomerate’s strategy to focus on core projects, which include power generation, ports, and newer green energy initiatives, as well as to prepay debts.
Reacting to the news, Adani Wilmar shares opened 4.8% lower at ₹374 against the previous closing price of ₹393.05 on the BSE. In comparison, the BSE Sensex opened 92 points, or 0.14%, lower at 65,753 levels.
Incorporated in January 1999, Adani Wilmar is an equal joint venture between billionaire Gautam Adani-led Adani group and Singapore’s Wilmar group. The company, which sells edible oil, packaged food and cooking essentials under "Fortune" brand, made its debut on the stock exchanges in February 2022 after ₹3,600 crore through its IPO. As on March 31, 2023, the company had an installed capacity of 16,935 TPD (tonne per day) of crude oil refining and 7,925 TPD of crushing with a combination of port-based and inland manufacturing facilities at more than 60+ locations across India. It is a market leader in soyabean oil, mustard oil and rice bran oil, and ranks amongst top three players in palm oil and sunflower oil.
Also Read: Adani Wilmar: Businesses of Scale
Last week, Adani Wilmar released its June quarter earnings report which showed that the company slipped into losses as profitability was eroded by fall in edible oil prices. The FMCG company posted a net loss of ₹79 crore in Q1FY24, compared to a net profit of ₹194 crore in the corresponding period last year. The revenue from operations of the country’s largest packaged oil maker dropped 12% to ₹12,928 crore as against ₹14,724 crore in the year-ago period.
On the operating front, Earnings before Interest, Taxes, Depreciation, and Amortisation (EBITDA) declined sharply by 71% to ₹130 crore, compared to ₹443 crore in the year-ago period. The EBITDA margin stood at 1% versus 3% in the same period last fiscal.
During the quarter under review, the revenue from the edible oil segment slipped 14% YoY to ₹9,845 crore, while the food and FMCG business segment recorded a revenue growth of 28% YoY to ₹1,097 crore.
In a fresh development, rating agency CARE has reaffirmed the ratings assigned to the bank facilities and commercial paper of Adani Wilmar, citing its established market position in the domestic edible oil market with the leadership position of ‘Fortune’ brand in the segment. The agency has assigned a stable outlook to the bank facilities of the company as it continues to derive strength from strong market position of the company in the edible oil segment and diversified product portfolio. Adding to it, expected stabilisation in edible oil prices will improve the performance of the company, going forward, the rating agency said.
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