Adani Wilmar Limited is one of the few large FMCG food companies in India to offer most of the essential kitchen commodities for Indian consumers, including edible oil, wheat flour, rice, pulses and sugar. Company's products are offered under a diverse range of brands across a broad price spectrum and cater to different customer groups. Company is a joint venture incorporated in 1999 between the Adani Group, which is a multinational diversified business group with significant interests across transport and logistics, and energy and utility sectors, and the Wilmar Group, one of Asia's leading agribusiness groups which was ranked among the largest listed companies by market capitalization on the Singapore Exchange as of June 30, 2021. Company's portfolio of products spans across three categories: (i) edible oil, (ii) packaged food and FMCG, and (iii) industry essentials. A significant majority of the sales pertain to branded products accounting for approximately 73% of the edible oil and food and FMCG sales volume for the financial year 2021 (excluding industry essentials which were offered on a non-branded basis). As of March 31, 2021, the Refined Oil in Consumer Packs ('ROCP') market share of AWL's branded edible oil was of 18.3%, putting them as the dominant No. 1 edible oil brand in BHARAT. 'Fortune', the flagship brand, is the largest selling edible oil brand in BHARAT. They have also leveraged the brands and distribution network to offer a wide array of packaged foods since 2013, including packaged wheat flour, rice, pulses, besan, sugar, soya chunks and ready-to-cook khichdi. They also offer a diverse range of industry essentials, including oleochemicals, castor oil and its derivatives and de-oiled cakes. In recent years, company has been placing an increasing focus on value-added products, with an aim to diversify the revenue streams and generate high profit margins. The value-added products they have launched in recent years include functional edible oil products, such as rice bran health oil, fortified foods, ready-to-cook soya chunks and khichdi, and FMCG. As of the date of this RHP, they have 22 plants which are strategically located across 10 states in India, comprising 10 crushing units and 19 refineries. Out of the 19 refineries, ten are port-based to facilitate use of imported crude edible oil and reduce transportation costs, while the remaining are typically located in the hinterland in proximity to raw material production bases to reduce storage costs. The refinery in Mundra is the one of the largest single location refineries in BHARAT with a designed capacity of 5,000 MT per day. In addition to the 22 plants they own, they also used 36 leased tolling units as of September 30, 2021, which provided them with additional manufacturing capacities, with an asset-light business model. They have the largest distribution network among all the branded edible oil companies in BHARAT. As of March 31, 2021, they were present in one out of three households in BHARAT with a household reach of 90.51 million through the Fortune brand. As of September 30, 2021, they had 5590 distributors. The distributors are located in 28 states and eight union territories throughout BHARAT, catering to over 1.6 million retail outlets. These retail outlets represent approximately 35% of the retail outlets in India. As of September 30, 2021, they also had (i) 88 depots, with an aggregate storage space of approximately 1.8 million square feet across the country to ensure availability of the products; and (ii) 685 personnel in the sales and marketing team. They leverage the edible oil distribution network for packaged foods, and currently, they have approximately 64% of the edible oil distributors catering to the packaged food distribution. In addition to traditional retail distribution channels, they also serve the customers offline and online through Fortune Mart and Fortune Online and provide them with ease of ordering the products from home. As per financial performance, AWL has posted total income/net profits of Rs 28,919.68 Cr / Rs 374.62 Cr (FY19), Rs 29,766.98 Cr / Rs 459.69 Cr (FY20), Rs.37,195.66 Cr / Rs 727.44 Cr (FY21) Rs. 24,957 Cr / Rs 374.64 Cr (H1 FY22). So company has posted good results over last couple of years. They have posted an average EPS of Rs. 5.07 and average RoNW of 19.97% for last three fiscals. Issue is priced at a P/BV of 7.2 as per NAV of 31.95 on 30.09.21. The only concern is high amount of debt, which will be reduced post IPO. If we attribute latest earnings of FY21 on fully diluted equity post issue, then asking price is at a P/E of around 41 and as per FY22 annualised earnings P/E is around 42, which looks fully priced. As per RHP, comparison between listed players is shown in above table. On BRLM's front, seven lead managers are associated with this IPO, and have handled around 97 IPOs in last three fiscals. From last 10 IPOs, five is opened below issue price and remaining are opened above issue on the day of listing. As of now, two are trading below issue price and other are trading above issue price. ( As on 21.01.22) As per financials, Adani Wilmar Limited has shown good growth, RoNW is 22.06% and P/E is respectively 41 and 42 as per FY21 and annualised FY22 earnings, which looks fully priced. Company is in FMCG sector and created good brand visibility. We expect company will able to show good growth. Performance of BRLMs are good. So, we give SUBSCRIBE rating for this IPO and one should hold it for long term in portfolio.
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