Adani Wilmar IPO: The Fortune Company

Let me tell you a tale about a tel. The golden liquid that turns the simplest ingredients into a gourmet delight by adding crunch and flavour, is an integral part of many cuisines the world over. The Indian populace has a particular fondness for this fatty fluid.

But as I just said, this fluid is fatty, and with its fondness comes guilt. The guilt of looking a bit too "Halthy" (looking at you, colony wali aunty!) haunts every human that ever wishes to indulge in the goodness of a tasty, delicious snack.

But what if there was an oil that sold itself as the healthy oil? What if an oil existed, that would involve feeling less guilty after consuming it?

Fortune-ately, such an oil exists. Or at least it's branded itself in this light. Can you guess which oil? (reread the line. I know you can do it!😁)

Today we read about Adani Wilmar and the product line named Fortune.

Fortune Favours the Smart

In the early 2000s, the average Indians looking to buy oil didn’t have the best options. They had to either choose good quality oils that cost too much or choose economical oils that didn’t have the best quality.

The everyday consumers ended up choosing the oils with better quality as their family’s well being was concerned, even if it meant spending a premium amount of money for a somewhat trivial everyday use product.

During these times, there were many brands selling oils, but the majority of the market was held by companies like; Sundrop, Saffola, Sweekar, Dhara and Gemini. While Sundrop and Saffola were the premium oils, Sweekar, Dhara, Gemini and more were the budget-friendly variants.

This was when the Adani Group decided to step into the game. The business giant created a joint venture with one of Singapore’s biggest agri-companies, Wilmar International. This very joint venture created the brand that has earned fame in most Indian households, Fortune.

But Rome wasn’t built in a day, and Fortune wasn’t the famous brand it is today from the day of its conception. Fortune reached the stratum it is at today slowly, gradually, making the intelligent plays along the way.

The secret ingredient to Adani Wilmar’s Fortune

As mentioned before, the Indian consumer had to choose between affordability or quality of the oil. Adani Wilmar's Fortune worked to solve this very dilemma. Fortune was created as the healthy oil that kept your wallet and pocket fit too.

Achieving this lucrative price while keeping costs under control was the name of the game. And Adani Wilmar came prepared to win.

Fortune achieved success with a two-pronged approach. The strategy involved cost efficiency as well as competitor study.

To reduce costs, Adani established a port in Mundra. The port was initially set up to support its coal trading business. But it later turned into the site that sustained many businesses for the Adani Group. One such business was an edible oil refinery established in the year 2000, following the formation of the Adani Wilmar JV.

A port-based refinery meant that the oil production process did not entail unnecessary transportation costs or wasted time.

Next came the market research. As far as oils were concerned, sunflower was saturated- with competitors, but soyabean was untapped. Thus, Adani Wilmar created Fortune to drill into the soybean market (yes, I believe those are funny puns).

Fortune's soyabean oil was successful owing to its better quality. Unlike its very few competitors, the lack of a distinct “fishy smell” in Fortune’s oil proved this quality improvement.

With this success fuelling Adani Wilmar, Fortune soon started entering various oils. Being a new entrant to the sunflower oil segment was a bad idea. But joining it as a significant player in the edible oil industry with the success of soyabean oil reinforcing its position was going to be a different story. Now, Fortune didn't have to compete against players with a head start.

Fortune was now slowly eating away at their market shares.

Today, Adani Wilmar is a leader in the Indian edible oil industry with an 18.30% market share in the Refined Oil in Consumer Pack segment, thanks to Fortune. Fortune’s taste has made its way into every household to become a go-to ingredient for all foods rich and delicious.

Fortune has also made headway into the packed food segment with various flours, pulses, and speciality fats.

But this has been Adani Wilmar's past. Its present holds an event of equal importance. Adani Wilmar is bringing an IPO. Let's find out about this IPO now.

Adani Wilmar IPO

Source: Adani Wilmar IPO details on Ticker

A fact that stands out about this IPO is that the entire offering is a fresh issue. This means that the whole ₹3600 crore will be raised by issuing new shares to the applying shareholders. The owners are not selling any of the shares held by them.

This is a good piece of information as most IPOs are an attempt by the existing shareholders to exit from the company. Adani Wilmar's shareholders not exiting means that they are confident about the company's performance.

Speaking of which, let's look at the oil giant's financials.

The graph shows a commendable performance by Adani Wilmar in the last three years. The company has been increasing its assets and has been effectively utilising these assets too. This effectiveness is evident if one pays attention to the company’s total revenue and profit after tax, the latter of which has nearly doubled in the last financial year.

But these aren’t all the pieces of information that you need. To make an informed decision to invest (or not), you will need significantly more detailed information. And my dear reader, you need not worry about where you can find this information; kyunki, Ticker hai na! Ticker has a plethora of helpful information for seasoned investors and new entrants alike.

But what good is information only? How is it different from just any number written in any context? Well, Ticker has you covered there too, with remarks on the company’s valuation, ownership and more to help you make sense of what the various figures mean.

Objectives of the IPO

Now that you know what the company’s financials look like, here is the reason for this IPO at a glance:

1. Fund acquisition to facilitate expenditure in expansion through investment in existing manufacturing units and establishing new ones.

2. Repayment and/or prepayment of the company’s borrowings.

3. For strategic acquisitions and other investments for the improvement of the company.

4. General corporate purposes.

Benefits and Drawbacks

Like the people that make it, no company is perfect. And although the blog has been all praises for the company so far, it’s been somewhat vague. So let us get a bit particular and look at the positives and the negatives of the company.

Opportunities

• Strong Financials

As mentioned above, the company has admirable performance in terms of financial status and is also planning to use the proceeds of the issue to further acquire new assets and improve existing assets. If these acquisitions and improvements are managed well, this could further enhance the company’s already positive standing.

• Majority Market Share

Fortune is the flagship brand by Adani Wilmar, and there are other brands under the JVs umbrella. Some of these brands are; King’s, Aadhar, Raag, Alpha and Fryola.

Fortune and King’s hold the first and third position in the market share of soyabean oil. Fortune holds the third position in the market share of the sunflower oil segment. Raag has second place in the market share of palmoleine oil, and Fortune holds the highest market share in mustard oil among listed companies.

• Promoter Confidence

While most IPOs are an exit option for the existing shareholders or promoters, the Adani Wilmar IPO is comprised wholly of fresh issue with none of the promoters selling their stakes.

This shows that the promoters are confident in the company’s operations and are not trying to jump off of a crashing ship.

Obstacles

• Risky Diversification

During its conception, Fortune entered the edible oil market with soyabean oil to avoid competing with the existing players that had already established dominant positions in the sunflower oil segment.

This was a smart move, and while Fortune did eventually venture into the sunflower oil segment, it did so because of the reputation it earned with the success of its soyabean oil.

Today, Fortune has its toes in multiple other FMCG businesses like various flours, pulses, industry essential fats and even soap and sanitisers. However, this diversity has not been as successful, as Adani Wilmar seems to have forgotten its own play and is competing against companies like ITC, HUL, etc.

• Effects of Covid-19

The Covid-19 pandemic caused multiple lockdowns, affecting Adani Wilmar’s business on national and international fronts. In India, production was affected as only two of the major manufacturing units in Mundra and Haldia were allowed to stay open during the pandemic.

Outside the country, restrictions in international transport had a negative impact on the acquisition of import based raw materials and other products.

With new variants of the virus crawling out of the woodworks (I’m not fluent in Greek, so I only know of updates as far as Omicron), Adani Wilmar might have to prepare for some leaner times ahead.

Conclusion

As a gluttonous individual, I will blatantly admit that oils might not be directly consumable, but their existence sure makes already good food, (food is always good) better. And I'm not the only statistical point in this demographic, so I'm pretty confident a lot of you reading this would agree with my sentiments.

Jokes aside, Fortune has placed itself well in a very prosperous industry. And if the confidence shown by the promoters in the management is not misplaced, the company could be a good bet for investors going forward.

So what say you? Care for a taste?

*Disclaimer: The stock discussed above aren't recommendations from Finology, they are only picked to make you understand the concept.