Adani Wilmar Shares Drop 7% Following Adani Group’s Exit from Wilmar JV

Shares of Adani Wilmar fell nearly 7% in early trade on December 31, 2024, after Adani Enterprises announced its decision to exit the joint venture (JV) with Singapore’s Wilmar International. The Adani Group will offload its entire 44% stake in Adani Wilmar Limited (AWL) as part of a $2 billion deal, with the sale price of ₹305 per share, representing a 7% discount to Monday’s closing price.

Market Reactions and Analyst Opinions

Stock Performance

• Adani Wilmar: Shares declined by 7% following the announcement.
• Adani Enterprises: Shares were down over 2% during morning trade.

Analysts’ Take on Adani Wilmar

1. Investec: Assigned a Hold rating with a target price of ₹397 per share, citing that the shift to single ownership will simplify strategic operations and benefit the company.
2. JPMorgan: Maintained an Underweight rating with a target price of ₹320 per share, highlighting Adani Wilmar’s sourcing, supply chain, and scale advantages as key strengths.

Despite the recent decline, analysts remain cautiously optimistic about the company’s operational capabilities.

Transaction Details

The exit involves two steps:

1. Stake Sale: Adani Commodities LLP, a subsidiary of Adani Enterprises, will sell its 31% stake to Wilmar International’s subsidiary, Lence.
2. Offer for Sale (OFS): A portion of the shares will be sold to institutional and retail investors.

The transaction is expected to:

• Accrue $2 billion for Adani Enterprises.
• Address liquidity concerns, especially following recent legal challenges faced by Adani Group’s founder, Gautam Adani.

The deal is slated for completion by March 2025.

Adani Group’s Recent Financial Moves

Funds Raised in 2024

• $500 million raised by Adani Enterprises in October.
• Approximately $4.5 billion raised collectively by Adani Energy Solutions, Adani Green Energy, and Ambuja Cement in recent months.

The stake sale reflects Adani Enterprises’ ongoing focus on core infrastructure sectors such as:

• Green hydrogen initiatives
• Data centers and digital services
• Consumer services under its airport business

Legal Challenges Facing Gautam Adani

This transaction comes at a critical time for the Adani Group, as its founder Gautam Adani faces legal challenges in the United States. Federal prosecutors have alleged a bribery scheme involving contracts in India.

The sale of Adani Wilmar shares is the group’s first major transaction since the Department of Justice (DoJ) indictment in November, signaling efforts to bolster financial stability and liquidity.

What’s Next for Adani Enterprises?

Adani Enterprises, as the flagship incubator for the group, plans to continue investing in:

• Infrastructure projects supporting India’s economic growth.
• Diversified ventures that align with key macroeconomic trends.

In a statement announcing the deal, the company emphasized:

“AEL will continue to invest in infrastructure sectors, further strengthening its position as India’s largest listed incubator of platforms supporting India’s growth story.”

The Adani Group’s decision to exit its JV with Wilmar International marks a significant shift, both for Adani Wilmar and the broader conglomerate. While the market reaction reflects short-term concerns, analysts and the company remain optimistic about its long-term growth prospects.

Investors should monitor developments closely, especially regarding the completion of the transaction and its potential impact on liquidity and expansion plans for the Adani Group.

Disclaimer: Investment decisions should be made after consulting certified financial experts.