Adani Wilmar: Should you hold, buy or sell the stock post a muted debut?

Edible oil major Adani Wilmar made a weak market debut on the bourses on Tuesday as opposed to what the Street had expected. The listing was in line with the overall weak market sentiment though the counter recovered from its inital loss as trade progressed. 

The stock listed at Rs 221 on the BSE, a discount of nearly 4 per cent over the issue price of Rs 230. On the NSE, it listed with a minor loss of 1 per cent at Rs 227. The stock was commanding a grey market premium of about 10 per cent ahead of the listing. 

However, post listing, strong demand from investors saw the stock stage a smart recovery as it rallied to a high of Rs 249, a 8 per cent premium to the issue price in intra-day trades. READ ABOUT IT HERE

The company’s IPO saw strong response from investors and had been subscribed 17 times. The issue had received bids for 212.88 crore shares against the offer size of 12.25 crore shares.

Stock strategy

Analysts are optimistic on the company’s growth prospects given its leading market position in the edible oil space, and its investment plans to expand market share across all segments. They recommend long term investors to put up with their positions. 

“Tepid listing of Adani Wilmar can be attributed to weak market sentiments otherwise fundamental and valuations were good for this IPO. Those who applied for listing gain can maintain a stop loss of 200 while long-term investors should hold it. New investors can also look at buying opportunities at initial weakness, said Santosh Meena, Head of Research, Swastika Investmart. 

According to Ravi Singhal, vice-chairman, GCL Securities, long-term investors can keep the stock in their portfolio as the company is a market leader in the segment it operates in. 

“One can hold on a long term basis as the issue is fully priced going with the brand name of Adani and the growth potential of this company”, said Manoj Dalmia, founder and director, Proficient equities Pvt Ltd. 

Adani Wilmar has a presence in most of the packaged food categories through their flagship brand “Fortune” and its brands cater to various price points. “Fortune” with premium pricing and “Bullet” with value pricing – to optimize their customer reach, to have products for a diverse range of consumers and achieve better brand recognition, brokerage KR Choksey had said in a IPO note. 

Its portfolio can be broadly classified into edible oil, packaged food and FMCG, and industry essentials. The first two categories accounted for 73 per cent of the company’s sales in FY21, as per analysts at Arihant Capital. 

As of FY21, Fortune had a 18.3 per cent share in the Refined Oil in Consumer Packs market. In FY21, Fortune was present in at least one-third of all the households in India, they had said in an IPO note.  

“Those who have subscribed the issue solely for listing gains would not be happy and can square-off their positions in the range of Rs 255- 260. Short-term investors can hold the stock and book profits around Rs 290 – 300 levels.  Long-term investors and investors looking to buy the stock on the listing day, however, can still hold / buy this stock, given its wide distribution, healthy financials, strong brand recall, increasing reach and household consumption, its prospects appear to be optimistic over the long-term,” said Likhita Chepa, senior research analyst at CapitalVia Global Research.