Adani Wilmar IPO closes day before Budget, 20% short of original plan

Adani Wilmar, a 50:50 joint venture company between Gautam Adani-led conglomerate Adani Group and Singapore's Wilmar Group has closed its IPO a day prior to the Union Budget. Interestingly, the IPO size was reduced by 20% from the initial plan to raise ₹4,500 crore, as per the draft red herring prospectus (DRHP) filed on August 02, 2021.

The August DRHP said: "Initial public offer of up to [*] equity shares of face value of ₹1 each (equity shares) of Adani Wilmar Limited for cash at a price of ₹[*] per equity share aggregating up to ₹45,000 million (Issue)."

It earmarked ₹1,900 crore for capex, ₹1,170 crore for repayment of loan and ₹500 crore for acquisitions. Adding all the earmarked funds in DRHP, Adani-Wilmar still had scope to allocate ₹930 crore under GCP.

It left the General Corporate Purposes field blank stating: “The amount utilised for General Purposes shall not exceed 25% of the net proceeds”.

But on January 19, this year Adani Wilmar filed the red herring prospectus (RHP), where it reduced the IPO size to ₹3,600 crore and decided to allocate just ₹191 crore under general corporate purpose. It also reduced repayment loan allocation to ₹1,058.9 crore and funding acquisition to ₹450 crore. Allocation under capital expenditure remains ₹1,900 crore. As per SEBI's Issue of Capital & Disclosure Requirements Regulations (ICDR), a company offering fresh issue of shares through IPO can reduce or enhance IPO size by 20% (maximum limit) of the estimated size mentioned in DRHP.

As per rules, a fresh filing of a draft offer document is required in case of a fresh issue, if the estimated issue size increases or decreases by more than 20%.

A market veteran on condition of anonymity tells Fortune India that the General Corporate Purpose segment was left blank as the company was not sure about the response of the market to the IPO size.

"It is always easier to say a company doesn't require any money for general corporate purposes than to admit that the market is not ready to assign the valuation and capital which it was seeking," the market veteran adds.

However, early closure has surprised many. The reduced size of the IPO was exactly up to the limit allowed by SEBI such that the company wasted no time in filing a fresh prospectus that would have pushed the IPO closure post the Budget announcements.

A source close to Adani-Wilmar says the cut in IPO size was a conscious decision by management and not due to any lack in demand or unfavourable market conditions.