Adani Wilmar IPO: GMP halves in a week; analysts expect 10-25% listing gain

Analysts believe Adani Wilmar's strong parentage links with the Adani Group may give it a necessary fillip on the listing day

Last week's stock market rout, especially in the broadeer market, has eroded half of Adani Wilmar's grey market premium (GMP). From a high of Rs 70 per share, the GMP of unlisted shares have declined to Rs 23 at the moment. This translates into a listing premium of just 10 per cent.

"The bearish sentiments, especially in the broader market, coupled with tepid listing of recent market debutants have shaken faith of investors in the primary market. The GMP of Adani Wilmar has declined about 50 per cent in a week and we expect a listing premium of around 10-15 per cent," said Manan Doshi, co-founder, Unlisted Arena.

Equity markets have been on a slippery slope ever since the US Federal Reserve hinted at interest rate hikes from March onwards. The benchmarks S&P BSE Sensex and the Nifty50 indices tumbled 3 per cent each last week while the broader BSE MidCap and SmallCap indices shed upto 3.4 per cent.  The BSE IPO index, which tracks the share performance of recently listed stocks, too, dropped a massive 7.6 per cent during the week, suggesting profit booking in the newly listed counters.

And even as the secondary market looked to gain ground on Monday, shares of AGS Transact Technologies made a quite debut on the bourses. Against the issue price of Rs 175, the shares of AGS Transact, an integrated omni-channel payment solutions provider, listed at Rs 176 on the BSE. Post listing, the shares turned southwards and hit a low of Rs 160 per share, down 9 per cent against the issue price. In comparison, thge BSE Sensex was up 1.45 per cent at 1:45 PM. 

That said, Doshi believes Adani Wilmar's strong parentage links with the Adani Group may give it a necessary fillip on the listing day.

"Besides its parent company, if we see a turnaround in the sentiment after tomorrow's Budget, then the listing premium can rise up to 20-25 per cent," he said.

Meanwhile, Likhita Chepa, senior research analyst at CapitalVia Global Research added that given its wide distribution, healthy financials,  strong brand recall, increasing reach and household consumption, its prospects appear to be optimistic over the long term.

"Therefore, investors can subscribe this issue for long term while short-term investors can consider booking profits after 35 to 40 per cent returnsin one year. Considering the current GMP and prevailing volatility in the market, investors who have subscribed the issue for listing gains can expect 15 to 18 per cent gains on the listing day," she said.

The initial public offering of edible oil major Adani Wilmar Limited has received 4 times subscription as at 1:45 PM on the final day of the offering. The category for Retail Individual Investors (RIIs) was subscribed 3.12 times, while non-institutional investors received 10.65times subscription and Qualified Institutional Buyers (QIBs) 2.5 times.

The IPO of up to Rs 3,600 crore is in a price range of Rs 218-230 per share.

Adani Wilmar, which sells cooking oils and some other food products under the For­tune brand, is a 50:50 joint venture between business conglomerate Adani group and Singapore-based Wilm­ar. On Tuesday, Adani Wilmar Ltd had raised Rs 940 crore from anchor investors.

According to analysts at KR Choksey,  AWL’s focus on growth of FMCG and packaged food business and shift to value added products will result in increasing market share and expansion of margins. "With the Indian economy recovering strongly from the Covid-19 impact and expected to grow faster to become a $5 trillion economy, places AWL in a sweet spot to grow multifold. Hence, we recommend ‘SUBSCRIBE’ for long-term gains," they said in an IPO report. READ BROKERAGE RECOMMENDATION HERE

Those at Choice Broking said, at the higher end of the price band of Rs 230, Adani Wilmar is demanding a P/E multiple of 37.5x, which is a discount to peer average of 57.6x. Its edible oil business is likely to have a secular growth market, but there is a huge untapped market for its Food & FMCG business segment. Hence, it recommended a 'SUBSCRIBE' rating on the isuse.