Why Adani Wilmar Share Price is Falling

Editor's note: Adani group stocks are the biggest movers in the stock market today. Most Adani group stocks have witnessed a steep selloff.

The selloff comes after Bloomberg reported a US activist firm Hindenburg Research LLC taking a short position on the group stocks.

Reportedly, Hindenburg has accused Adani group of market manipulation and accounting fraud. At the time of posting this, the Adani Group had yet to respond to these allegations.

Note that this selloff comes at a time when the group's flagship firm Adani Enterprises has planned India's biggest every follow-on public offer (FPO).

What's more, the group has big IPOs coming up in the next few years. Adani Group's Chief Financial Officer recently stated that five of its subsidiaries will make market debuts between 2026 and 2028.

These allegations are not the only reasons dragging Adani Wilmar shares lower. There could be other reasons too.

In December 2022, we wrote about those reasons and explained in detail why Adani Wilmar was falling.

Continue reading...

Why Adani Wilmar Share Price is Falling

Adani group stocks have emerged as the best-performing stocks since the March 2020 crash.

All Adani group companies witnessed a massive rally, making Gautam Adani the wealthiest man in India.

But with the market tanking 600 points yesterday amid concerns of an impending recession and a worsening Covid-19 situation in China, a couple of billionaire Gautam Adani's companies have seen a sharp decline.

Most of these stocks tumbled up to 6%. Among them was Adani Wilmar, which registered the second-highest fall among the Adani Group stocks.

The shares of the Adani Wilmar tanked 5.6% intraday yesterday.

Is the market factoring in the high valuations of these companies?

It could be.

So far in 2022, shares of Adani Wilmar have gained 106%.

This rally was on the back of a massive supply crunch for palm oil, soybean, and sunflower oil due to the Russia-Ukraine war. With market-leading positions across all these categories, the stock is riding the momentum rally.

In addition, volume recovery, driven by a recovery in rural demand due to festive and wedding seasons, has added to the rally.

Due to these reasons, the valuation of the company has seen a steep rise. The company's current PE multiple stands at 109.7 x, higher than the industry PE ratio of 41.3x.

Therefore, this dip could be due to profit booking in the stocks.

Muted quarterly results due to input inflation

The company reported a 73% YoY decline in the second quarter profit, down to Rs 487 m from Rs 1.8 bn a year ago. This decline was due to the dull demand from rural areas and input cost inflation.

Revenue from operations also rose at a muted 4% year-on-year (YoY) to Rs 141.5 bn as against Rs 135.6 bn. This could have been higher but the edible oil segment witness multiple headwinds during the quarter.

Due to macro factors affecting the demand-supply, the segment witnessed a steep decline in palm oil, soybean oil and sunflower oil prices.

Going forward, the company is planning to reduce its input cost and is looking to increase its reach in the premium segment through its brand Kohinoor.

How shares of Adani Wilmar have performed

Adani Wilmar's share price is down 13% in a month. So far, in 2022, the shares are trading higher by 106.5%.

In a week, the shares have eroded 13.6% of their market value.

The company touched its 52-week high of Rs 878 on 28 April 2022 and its 52-week low of Rs 227 on 8 February 2022.

About Adani Wilmar

Adani Wilmar is a joint venture between the Adani group and Singapore-based Wilmar International.

The company is one of the largest fast-moving consumer goods (FMCG) companies in the country.

Its products include edible oil, wheat flour, rice, pulses, and sugar.

The company has products in three broad categories - edible oil, packaged goods and FMCG, and industrial essentials. The majority of its revenue comes from the edible oil segment, followed by industry essentials, and packaged goods.

Fortune oil, its flagship brand, has the highest market share in the oil segment. The company has the largest distribution network among all the branded edible oil companies in India.

In the industrial essentials segment, the company is the largest manufacturer of basic oleochemicals, stearic acid, and glycerin. It's also one of the largest exporters of oleochemicals in India.

In recent years, Adani Wilmar has been placing an increasing focus on value-added products to diversify its revenue streams and generate high-profit margins.

For more details about the company, you can have a look at the Adani Wilmar company fact sheet and quarterly results on our website.

You can also compare Adani Wilmar with its peers.

Adani Wilmar vs Patanjali Foods

Adani Wilmar vs NK Industries

Adani Wilmar vs Gokul Refoils

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

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