Adani Wilmar Share Price Drops 5% Amid Adani Enterprises' $2.7B Stake Sale Plan

Adani Enterprises, led by Gautam Adani, is exploring the sale of its 44% stake in Adani Wilmar due to challenges stemming from a decline in revenue linked to falling edible oil prices. While Adani Wilmar's shares experienced a 5% drop, Adani Enterprises' shares rose by about 1% on the Bombay Stock Exchange. In Q1 of 2023, Adani Wilmar reported a 12% YoY revenue decrease to ₹12,928 crore, mainly attributed to lower edible oil prices, but its food and FMCG segment displayed a notable 28% YoY growth.

Adani Enterprises Considering Sale of 44% Stake in Adani Wilmar

In a significant market development, Adani Enterprises, led by billionaire Gautam Adani, is reportedly in the early stages of considering the sale of its substantial 44% stake in Adani Wilmar. This move comes amidst challenges faced by Adani Wilmar, including a noticeable decline in revenue primarily attributed to a sharp plunge in edible oil prices.

In the morning trading session on Thursday, the stock market witnessed a contrasting scenario, as Adani Wilmar's share prices experienced a nearly 5% fall, while Adani Enterprises' shares managed to inch up by approximately 1% on the Bombay Stock Exchange (BSE).

For the quarter spanning April to June 2023, Adani Wilmar reported a significant year-on-year drop of 12% in its consolidated revenue, amounting to ₹12,928 crore. This decline is a direct consequence of the substantial downtrend in edible oil prices. Interestingly, within its diversified portfolio, the food and FMCG segment displayed resilience by achieving an impressive 28% year-to-year growth in revenue, amassing close to ₹1,100 crores.

In recent times, Adani Wilmar faced headwinds as it recorded a loss in the first quarter, primarily attributed to the steep descent in edible oil prices. Consequently, the company's shares have witnessed a decline of approximately 36% in value this year, resulting in a current valuation of around $6.2 billion for the company.

The broader context indicates that Adani Group-linked stocks experienced a staggering reduction in market value by almost $147 billion earlier this year, following concerns raised by U.S. short-seller Hindenburg Research regarding the group's corporate governance practices. In response, Adani Group vehemently contested these allegations, branding the report as a baseless attempt to discredit its reputation.

Adani Wilmar, established in 1999, stands as a key player in India's FMCG sector, delivering essential kitchen commodities to millions of households. Their product range includes edible oils, wheat flour, rice, pulses, and sugar. The company's efficient distribution network, comprising over 10,000 distributors, extends its reach to more than 114 million households across the country. Despite recent challenges, Adani Wilmar remains steadfast in its commitment to expand the distribution of both its oil and food products, capitalizing on robust demand from both urban and rural consumers.

As part of the potential stake sale, Gautam Adani and his family might retain a minority stake in a personal capacity, as indicated by Bloomberg reports. Although specific details of this sale are yet to be finalized, the move underscores Adani Enterprises' strategic adaptation to market dynamics, seeking to optimize its portfolio for sustained growth in a dynamic economic landscape.

Adani Wilmar successfully garnered approximately Rs 36 billion ($435 million) through its inaugural public offering held in Mumbai in 2022. The combined interests of Adani and Wilmar constitute substantial ownership, encompassing nearly 88% of the total company shares. In accordance with the regulations set forth by the Securities and Exchange Board of India (SEBI), sizeable corporations are mandated to maintain a minimum public shareholding equivalent to at least 25% within a span of five years from the listing date.