Edible oil major Adani Wilmar Ltd (AWL) has cut the size of its initial share-sale to Rs 3,600 crore from the Rs 4,500 crore planned earlier. The company, which sells cooking oils under the Fortune brand, is expected to float its initial public offering (IPO) this month. There will not be any secondary offering. Now, the IPO will comprise a fresh issue of equity shares worth Rs 3,600 crore.
AWL is a 50:50 joint venture company between Ahmedabad-based Adani group and Singapore’s Wilmar group. The company has only reduced the portion of general corporate purposes and not reduced the core objects of the issue. Out of the IPO proceeds, Rs 1,900 crore will be used for capital expenditure, Rs 1,100 crore will be used for the repayment of debt and Rs 500 crore in funding strategic acquisitions and investments. The move to cut the IPO size is perceived to be a good move by investors as the issue size optimisation will help the company have better return of capital employed (ROCE) and return on equity (ROE). Despite the issue size reduction, the company will be flooded with high cash generation as it will repay the full long term borrowing of Rs 1,100 crore and save on interest cost and also fund the entire capex (capital expenditure) requirement through equity.