Adani Wilmar, a leading edible oils and consumer goods company in the Indian market, has been facing maximum pressure lately, given that its shares fell by around 9% on January 10, 2025. This slide followed the announcement of the promoter, Adani Commodities, about an Offer for Sale (OFS) of up to 20% in the company. This move has elicited considerable worry among investors, considering the persisting volatility in the stock and general market environment.
In this blog, we will delve deep into the nuances of the situation prevailing at present concerning Adani Wilmar, the effect that the promoter’s decision to divest a considerable stake has caused, and what this holds in store for the investors and the company shortly.
The Recent Downtrend in Adani Wilmar’s Share Price
The scrip again plunged further. On 10 January 2025, at ₹292 apiece, with a drop of 9.5% share price further, Adani Wilmar ended this third day after the slide with heavy losses in succession. Its current stock prices plunged even further and below their past trading prices. As of today, the stock has lost more than 11% in just three days alone, a stark contrast to the relatively modest decline seen in the benchmark Nifty 50 index over the same period.
Adani Wilmar’s stock price is now drifting near its 52-week low of ₹279 per share touched on November 22, 2024. The recent erosion in the stock price has put both retail and institutional investors on their toes, mainly because the stock had touched a significant high of ₹1,000+ per share earlier during its market life.
Offer for Sale (OFS) Details and Impact on Stock Price
The sharp decline witnessed in the price of Adani Wilmar can be attributed to one primary reason—the announcement of the two-day OFS by promoter Adani Commodities. For non-retail investors, OFS will take place from 10 January through 12 January 2025. For the retail investors, OFS has been scheduled starting 13th January 2025.
Adani Commodities, which currently holds a 44% stake in Adani Wilmar, intends to sell an equity stake amounting to up to 13.5% of the total stake with a total of 17 crore shares. Additionally, the OFS includes an oversubscription option, wherein an additional 6.5% stake or 8.4 crore shares can be sold. The offering price has been set at ₹275 per share, which is a 6% discount from the stock’s lowest price on January 10.
This is an important move from Adani Commodities as not only does it exert pressure on the stock price on account of the supply of shares, but it also indicates that the company is desirous of reducing its holding in Adani Wilmar. Since the OFS is happening at a discount, many investors are worried about the dilution of value to existing shareholders.
Strategic sale and future of Adani Wilmar
This is part of a larger strategy that Adani Enterprises, the flagship entity of the Adani Group, has to exit its joint venture in Adani Wilmar. Adani Enterprises will sell a 13% stake in Adani Wilmar to meet the minimum public shareholding requirements mandated by Indian regulatory authorities. Besides, Wilmar International, the other promoter of Adani Wilmar, is to acquire a significant portion of the remaining 31% stake.
This strategic sale is likely to provide Adani Enterprises with substantial liquidity, which may be used for debt reduction and other capital expenditure requirements. A report by Ventura Securities stated that the proceeds from this sale will enhance the liquidity position of Adani Enterprises, enabling it to raise additional debt of around ₹35,000 to ₹36,000 crore, thus creating a fund worth approximately ₹50,000 to ₹52,000 crore.
1. Impact on the Capital Structure of the Adani Group
The sale of a significant portion of its stake in Adani Wilmar is in line with the short-term and long-term strategy of the Adani Group to maintain a good capital structure and meet its new financial management. Currently, the equity portion of the Adani Group is 63% of the total assets, and that is likely to go higher after the sale of shares by the Adani Group in its arm, Adani Wilmar.
Adani Enterprises aims to bring a balance between enhancing the liquidity of the group and holding onto its assets by reducing its stake in Adani Wilmar. This is significant for the Adani Group in its quest to further optimize its capital allocation across different verticals – energy, infrastructure, and consumer goods – through the streamlining of its operations.
2. Positive Trends and Regulatory Issues
While the strategic sale of Adani Wilmar would provide liquidity to the Adani Group, in the same breath, it has to be stated that there have been several positive trends in the business operations of the company lately. Adani Wilmer is the largest edible oils manufacturer in India and has enjoyed strong demand for its products. Among some of the most recognizable brands in edible oils and consumer goods, Fortune and King’s are part of the company’s portfolio.
Despite these issues, Adani Wilmar has not been without its troubles. The biggest issue that the company faces is the regulatory environment, specifically regarding its financial practices. Paytm has not yet received a license from the RBI to act as a payment aggregator; this remains an integral aspect of its business model. Over the last few months, regulatory overhang has dented investor sentiment, with the company incurring continuous compliance issues.
For Adani Wilmar, the regulatory environment might still pose some hurdles. The sale of a significant stake by promoters may improve liquidity in the short term but might be more intensely questioned by regulatory authorities if this alters the ownership pattern or corporate governance.
Stock Performance and Market Sentiment
Adani Wilmar’s stock has been very volatile in the recent past. It had risen to ₹1,000+ per share from ₹1,955 all-time high and is down by over 50%. This sharp correction followed the RBI’s decision to wind down Paytm’s banking unit after persistent compliance issues.
Despite this disappointment, Adani Wilmar’s stock price had rallied a little in the last year, but this recent decline has once again brought into focus the ambiguity that still prevails in the market. Investors have been selling the shares before the OFS, and thus the stock price has seen a steep fall. But a section of analysts believes that, once the OFS is over and the overhang of promoter selling is removed, the stock may see a rebound.
Outlook for Adani Wilmar and Investor Sentiment
The future of Adani Wilmar is quite uncertain, as several factors will influence its outlook. On the positive side, the company has a strong product portfolio, a robust market presence, and a growing consumer base. The strategic sale by Adani Commodities may result in a more streamlined ownership structure, which will positively impact investor sentiment in the long run.
On the flip side, the persistent regulatory headwinds and the further dilution of promoter stakes might continue to haunt the stock in the near term. Investors should keep a close eye on all the OFS-related developments, as well as any updates regarding the company’s regulatory approvals and compliance.
Conclusion: Buy, Hold, or Sell Adani Wilmar Stock?
Adani Wilmar’s recent performance and the announcement of the promoter’s stake sale through the Offer for Sale (OFS) have caused quite a ruckus in the stock. Shares fell 9.5% on January 10 and a series of developments in the company’s corporate structure left investors in a predicament over buying, holding, or selling the stock.
Company presence could be seen under a stronger brand, leadership in markets, and proper strategic moves related to enhancing its liquidity and structure of capital might bode well for its long-term prospects, but regulatory matters and promoter sale of stakes in the company will create volatility over the short run. So before investing in the same one should think at least a hundred times and make and keep watch upon the process related to the OFS process and other new regulatory issues emerge.
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