Why has Adani Wilmar cut the IPO size of its forthcoming issue from Rs.4,500 crore to Rs.3,600 crore?

Adani Wilmar Ltd, a joint venture between Adani group and Wilmar of Singapore, has decided to cut the size of its initial share-sale from Rs.4,500 crore to Rs.3,600 crore, due to tight market conditions and the uncertainty surrounding the LIC IPO. The LIC IPO is slated to absorb nearly Rs.90,000 crore from the market and hence other IPO issuers are trying to keep their IPO size down as a safety measure.

Adani Wilmar sells cooking oils under the Fortune brand and its entire IPO is expected to be a pure fresh issue of shares. However, its cost of projects for which the funds are being raised, remains the same and only fund raising for general corporate purposes has been cut down. The big IPO fund applications are Rs.1,900 crore for capital expenditure, Rs.1,100 crore for repayment of debt and Rs.500 crore in funding inorganic investments.

The decision to cut the size of the IPO will be positive in the sense that it will help the company to have better return of capital employed (ROCE) and return on equity (ROE) as the equity dilution is reduced. This is also likely to enhance its capital efficiency ratios. Adani Wilmar has annual revenues of Rs.37,195 crore. This will be the seventh Adani group stock to be listed on the stock exchanges.