Adani Enterprises to fully exit Adani Wilmar JV; check details here

Adani Enterprises Ltd (AEL) is exiting its 26-year joint venture with Singapore's Wilmar group, raising over $2 billion that it will invest in core businesses such as energy and utilities.

The Adani Group flagship on Monday said it will sell its entire 43.94% stake in Adani Wilmar Ltd-31.06% stake to its partner Wilmar International, and the balance to the public. The latter transaction will also raise public shareholding in Adani Wilmar to 25%, the mandatory minimum.

“AEL will use the proceeds from the sale to turbocharge its investments in the core infrastructure platforms in energy & utility, transport & logistics and other adjacencies in primary industry. AEL will continue to invest in infrastructure sectors which will further strengthen AEL’s position as India’s largest listed incubator of platforms playing the key macro themes underpinning India’s growth story,” Adani Enterprises said in a statement.

Adani Wilmar had a market capitalization of ₹42,824 crore ($5 billion) at market close on Monday, valuing Adani's stake in the fast-moving consumer goods company at ₹18,817 crore ($2.2 billion). The maker of Fortune oils, soya chunks and pulses closed FY24 with revenue of nearly ₹50,000 crore.

Adani Wilmar shares lost 0.17% to close at ₹329.5 on the BSE on Monday, compared to a 0.57% fall in the Sensex. Adani Enterprises gained 7.65% to close at ₹2,593.45. The announcement was made after market hours.

Presently, public shareholders hold only 12.13% of Adani Wilmar, which was listed in February 2022. In India, companies must meet minimum public shareholding requirements within three years of listing if their post-listing market capitalization is below ₹1 trillion.

Adani Wilmar will be changing its name, the company said. Pranav Adani and Malay Mahadevia, Adani Group’s nominee directors on the board of Adani Wilmar resigned on Monday.

Adani’s exit from the FMCG company has long been speculated, especially short-seller Hindenburg Research's allegations sparked a rout in its shares, sparking concerns over the group’s liquidity position in the case of a margin call by lenders. The Adani Group has denied all allegations.

“Today, Adani Wilmar is the only misfit in the Adani Group’s portfolio. Typically, the businesses that the Adani Group focuses on have a large upfront investment and then generate significant cashflows without day-to-day intervention. Consumer goods business is not that way,” said Deven Choksey, managing director of DRChoksey FinServ Pvt. Ltd.

Adani Wilmar's size was too small to provide a meaningful diversification from Adani's infrastructure sector, said Rajesh Palviya, senior vice-president, research (head, technical & derivatives) Axis Securities Ltd. Adani Wilmar’s ₹43,000-crore market capitalization is much lower than other listed Adani companies, most of which are worth above ₹1 trillion.

“Even after exiting Adani Wilmar, the Adani Group will have consumer-facing businesses like airports, Adani Digital and electricity distribution,” Choksey said.

The stake sale will also buffer the Adani Group’s liquidity position and its ability to service upcoming debt obligations. Adani Group’s net debt to Ebitda across portfolio companies currently stands at about 2.4x.