What made Adani exit from Adani Wilmar
Why is Adani Wilmar making drastic moves? Explore the company’s market power, the high-risk debt situation, and its bold pivot into cement—could these steps lead to a new chapter or disaster?
Adani Wilmar At A Glance
Founded in January 1999 as a joint venture between the Gujarat-based Adani Group and the Singapore-based Wilmar Group, Adani Wilmar Limited (AWL) is a leader in the edible oil sector. The company boasts a strong manufacturing footprint with an installed capacity of 16,810 TPD for crude oil refining and 7,275 TPD for crushing. AWL operates a network of port-based and inland manufacturing facilities across more than 60 locations in India.
AWL holds a dominant position in the edible oil market and ranks among the top 3 in various food segments. The company also benefits from a vast distribution network, reaching over 10,000 distributors and 30,000+ rural and urban towns, ensuring deep market penetration across the country.
The Exit: Adani Group's Full Stake Sale
On December 30, 2024, Adani Wilmar announced that the Adani Group would divest its entire 43.94% stake in the company. Wilmar International will acquire 31.06%, while the remaining 13% will be sold via an Offer for Sale (OFS) to meet minimum public shareholding norms. This divestment is expected to yield around Rs 17,400 crore for the Adani Group, assuming a share price of Rs 305.
This marks the complete exit of the Adani Group, which had originally planned to merge its commodity business with Adani Wilmar, only to abandon the merger before executing the stake sale.
What Led To The Exit? - High debt
Funding withdrawal
The bribery allegation filed against the company in a U.S. court resulted in the withdrawal of $600 million in debt funding, which was essential for repaying debt maturing in 2025 and 2026.
Difficult to raise international funds now
Following the allegations by Hindenburg regarding corporate governance issues, round-tripping, and the use of shell entities, it has become increasingly difficult for the company to raise new funding. This is because investors now require a clean background from the promoters and a clear explanation regarding the previous allegations.
In October 2024, Adani Enterprises Limited raised INR 4,200 crore (approximately USD 500 million) through a Qualified Institutional Placement (QIP) and Rs 3,874 crore through the issuance of Non-Convertible Debentures (NCDs).
Foray Into the Cement Industry
The Adani Group entered the Indian cement industry in May 2022 by acquiring Ambuja Cements and ACC from Holcim for $10.5 billion. Following these acquisitions, the group continued to expand its presence in the sector:
In June 2024, Ambuja Cements acquired a 100% stake in Penna Cement for over Rs 10,422 crore.
In October 2024, the Adani Group acquired a 46.8% stake in Orient Cement for Rs 3,800 crore.
ITD Cementation And PSP Projects Adani stake
The Adani Group acquired a 46.64% stake in ITD Cementation through its subsidiary, Renew Exim, for Rs 3,204 crore. Additionally, the group also acquired a 30% stake in PSP Projects for Rs 685 crore.
How Will It End? – Liquidity vs Long-Term Sustainability
The Rs 17,400 crore raised from the stake sale provides the Adani Group with immediate liquidity, which will help address debt maturities and offer temporary financial relief. However, the long-term sustainability of the company hinges on its ability to generate consistent cash flows from its various assets, especially considering the large debts accumulated through its expansions. Without strong cash flows, the company risks falling into a debt spiral.