Adani Group Sells Adani Wilmar to Wilmar International in $2 Billion Deal

In a landmark move, the Adani Group, led by Gautam Adani, has decided to divest its 44% stake in Adani Wilmar to Singapore-based Wilmar International for $2 billion.

This decision marks the group’s exit from the staples business, redirecting its focus and resources towards its core infrastructure operations.

Adani Enterprises and its subsidiary Adani Commodities together held a 44% stake in Adani Wilmar, a company known for its popular brands like Fortune sunflower oil and Kohinoor basmati rice.

Wilmar International will acquire 31% of this stake at Rs 305 per share, valued at $1.4 billion.

The remaining 13% will be offered to the public through an offer for sale (OFS) to meet regulatory requirements mandating a minimum of 25% public shareholding. This transition will end the Adani Group’s 25-year presence in the staples industry.

Impact of the Deal on Adani Wilmar

Following the agreement, Wilmar International’s ownership in Adani Wilmar will rise from 44% to 75%.

Adani Wilmar, a Mumbai-listed company, will be renamed to reflect its new ownership structure, with potential names such as AWL, AWL Agri Business, or Fortune Agri Business being considered.

Additionally, Pranav Adani and Malay Mahadevia, key figures from the Adani Group, have resigned from the company’s board.

This deal comes shortly after allegations of securities and wire fraud were raised against Gautam Adani by US authorities. The Adani Group has firmly denied these charges.

Financial Implications for the Adani Group

The $2 billion generated through this transaction will bolster the group’s liquidity, supporting investments in its core infrastructure sectors, including energy, transport, and logistics.

Earlier, the group sold its financial services business to Bain Capital. The funds from these transactions are expected to address concerns around the group’s financial health and liquidity, especially in light of recent legal challenges.

Market reactions to the deal have been significant. Shares of Adani Wilmar dropped nearly 7% following the announcement, trading at Rs 303.70 apiece.

Meanwhile, Adani Enterprises shares also saw a 2% decline. Analysts have expressed mixed views on the transaction, with Investec assigning a “Hold” rating with a target price of Rs 397 per share, citing strategic simplification.

On the other hand, JPMorgan gave an “Underweight” rating with a target price of Rs 320 per share, highlighting the company’s advantages in sourcing and supply chain management.

Broader Strategic Goals

Adani Enterprises, the flagship company of the Adani Group, is set to raise over $2 billion through the stake sale and OFS.

These funds will be directed towards ventures such as green hydrogen, data centers, digital initiatives, and consumer services under the airport business.

“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,” the company stated.

Prior to this deal, Adani Enterprises secured $500 million in October, while other group companies raised $4.5 billion collectively. These strategic moves underline the group’s commitment to infrastructure and energy investments.

Adani Wilmar’s Market Performance

Adani Wilmar, established in 1999, operates 24 factories across 15 cities in India. The company concluded FY24 with revenues nearing Rs 50,000 crore and a market capitalization of Rs 42,824 crore.

Despite its strong market presence, the company’s share price has seen a 17% decline in 2024 and a 50% drop over the past two years. As of December 31, shares of Adani Wilmar closed at Rs 329.5, reflecting a 0.17% decrease.

The divestment also signals a shift in Adani Enterprises’ strategy. “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,” the company emphasized.

Legal and Regulatory Context

The deal also comes amid ongoing legal scrutiny. US prosecutors have alleged a bribery scheme involving $265 million to secure Indian power contracts, which the Adani Group has categorically denied.

The divestment will help streamline operations and enhance the group’s financial position, as it continues to focus on infrastructure and macro growth themes.

Future Prospects

Wilmar International plans to fund the deal through internal resources and bank borrowings, with plans to explore strategic investors for Adani Wilmar.

The company sees immense growth potential in the Indian subcontinent, particularly in rural markets.

“The rural market in India presents significant growth opportunities, and Adani Wilmar is well positioned to capture a substantial market share,” Wilmar stated.

For 2023-24, Adani Wilmar posted revenues of Rs 51,262 crore, maintaining its leadership in the edible oil market.

The Fortune brand alone recorded annual sales exceeding Rs 20,000 crore, highlighting the company’s strong consumer base and market reach.