The Adani group is in separate talks with Wilmar International Ltd, GQG Partners Llc and the Qatar Investment Authority (QIA) to sell its entire stake in Adani Wilmar Ltd for $2-2.2 billion, two people aware of the development said.
No single entity is expected to acquire the stake on offer, and the Adani group may farm out shares in the edible oils maker to multiple buyers, the people cited above said on condition of anonymity.
“Apart from Wilmar, there are at least four global funds who are keen to buy Adani’s stake in Adani Wilmar, and the plan is to finalize the deal before the end of FY24,” the first person added. Mint could not ascertain the names of the other two funds.
Wilmar and Adani hold 43.97% each in the joint venture (JV). While the Adani group holds the promoter stake through Adani Commodities Llp, the Singaporean edibles giant holds it through Lence Pte Ltd.
“The (Adani) group is keen to shift focus from non-core ventures such as commodities and retail consumer goods to core infrastructure, energy, ports, logistics and cement businesses,” said the first person, adding that Adani Wilmar may be delisted after the transaction.
The company’s current promoter holding is way above the regulatory limit of 75%, and its new investors may have to work out a plan to bring it in compliance.
“Any change in promoter may require a mandatory open offer for acquiring up to 100% stake and suBSEquently listing at least 25% shares of the firm again to remain compliant and listed. Or, Wilmar along with others may buy back all shares from the public and delist,” the second person added.
A spokesperson for Wilmar International declined to comment. Emails sent to Adani group, GQG and QIA spokespersons remained unanswered.
Wilmar, among the most-valued companies in Singapore’s SGX, makes edibles, consumer products, ready-to-cook and ready-to-eat central kitchen products with over 500 manufacturing plants and a distribution network covering China, India, Indonesia and 50 other countries.
Among the suitors, while Wilmar is already a key edibles player in India through its JV with Adani, GQG Partners, a US-based boutique asset management firm led by Rajiv Jain, and Doha-based sovereign wealth fund QIA have significant investments in Adani group firms.
Since 2 March, GQG Partners has pumped in at least ₹37,440 crore into five Adani group firms, with the last instalment of ₹8,811 crore on 16 August in Adani Power Ltd. In the same month, QIA invested $500 million for a 2.5% stake in Adani’s listed renewable energy arm Adani Green Energy Ltd. Much of their investments came after the 24 January report by US-based short-seller Hindenburg Research that battered Adani group stocks and stripped them of $150 billion in investor wealth at one point.
The report forced the Adani group to change its strategy by lowering leverage levels and focusing more on energy and infrastructure-related businesses. The group, which operates the country’s busiest international airport in Mumbai and has won a bid to redevelop Asia’s largest slum Dharavi in the city, is also aiming to double its cement production capacity to 140 million tonnes per annum (mtpa) by 2028.
On 4 August, Mint reported that Adani will invest $4-5 billion to expand its cement capacity to over 100 mtpa in two years via greenfield and new acquisitions. On 17 October, The Economic Times reported that the Adani group is in talks to buy the cement businesses of debt-laden Jaypee Associates Ltd.
According to the two persons cited above, the Adani group is keen to acquire the cement business of Jaypee Associates for around ₹4,500 crore.
According to the latest strategy, the funds from the sale of stake in Adani Wilmar could be utilized for building a war chest to partly fund the mammoth $4-5-billion Dharavi redevelopment project via internal accruals, said the two persons.
“The country’s ready-to-eat food business, packaged edibles business and in-kitchen consumer product businesses are clearly growing. And, the (Adani Wilmar) stock may just be at its fair level at the moment for a possible share sale deal, which is why any prospective transaction in Adani Wilmar may close fast,” said the head of an investment advisory firm.
Shares of Adani Wilmar have plunged from the record ₹878 seen on 28 April last year, much of the decline coming after the Hindenburg report. On 20 November, Adani Wilmar fell to its lowest at ₹285.8 on the BSE. On Wednesday, the stock closed 1.95% lower at ₹313.95, 45% lower than when the Hindenburg report hit.
With the cooking oil business facing margin pressure, Adani Wilmar has reported losses for two consecutive quarters. For the September quarter, the firm announced a consolidated net loss of ₹130.73 crore.
The company’s consolidated total income fell to ₹12,331.20 crore during the July-September period from ₹14,209.20 crore in the corresponding period of the previous year.
During the September quarter of FY24, the cooking oils business accounted for 74% of the company’s total revenue from operations.