Adani’s consumer exit crystallises costs of crisis

Wilmar International

06/01/2025 11:59

(The author is a Reuters Breakingviews columnist. The opinions
expressed are her own.)
    By Shritama Bose
       MUMBAI, Jan 6 (Reuters Breakingviews) - Gautam Adani is
starting to move forward. The flagship firm of the Indian
tycoon's infrastructure group laid out plans last week to exit a
quarter century-old joint venture with Singaporean edible oil
giant Wilmar International. The agreement offers clear benefits
to the industrialist. It also hammers home the price he is
paying for successive crises. 
    Adani Enterprises  ADEL.NS  will sell a 31% stake in Adani
Wilmar  ADAW.NS , the maker of India's largest cooking oil
brand, to its partner for roughly $1.4 billion or less. That
will leave the $15 billion Singaporean group with 75% of the
Mumbai-listed company in a growing market for commodities Wilmar
deals in, including rice, wheat flour and sugar.     
    There’s a caveat, though. Wilmar has bought itself a year to
buy those shares and locked in a discount. Though the agreed
ceiling price is only 7% less than the last close, Adani Wilmar
was among the tycoon's stocks worst-hit in a short seller
campaign in early 2023 and the shares of the company remain some
40% lower than before the attack.
    That also buys time for the joint venture to look for new
strategic partners. The regulator requires Adani Wilmar to raise
its minimum public shareholding to at least 25% by February, up
from 12% currently, and so Adani Enterprises will sell its
remaining 13% stake to other investors.
    The larger agreement with Wilmar helps because it offers
prospective minority owners visibility on the ownership
structure and valuation at a time when the Indian group's
patriarch is facing U.S. charges of bribery, accusations he
denies. Wilmar too will only increase its own stake in the
venture once the freefloat hurdle is resolved.
    Ultimately, Adani Enterprises' exit makes sense and will
reinforce confidence in its ability to keep investing in its
core infrastructure assets including renewable energy; lenders
behind the wider group's $30 billion gross debt are still
digesting the implications of the U.S. legal problems. These did
not prompt Adani's decision to call time on the joint venture
but it almost certainly cost it a better deal.
    
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    CONTEXT NEWS
    India's Adani Enterprises said on Dec. 30 that it will exit
its consumer goods joint venture with Singapore's Wilmar
International in a two-part transaction.
    Adani Enterprises will transfer a 31% stake in Adani Wilmar
to its partner at a price not exceeding 305 rupees per share,
the edible oil maker joint venture said in a stock exchange
filing. 
   Singapore's Wilmar said its purchase of the stake will take
place through call and put options exercisable only after twelve
months from the date of the agreement. However, it added, the
parties agreed to explore options to expedite the transaction
once Adani Wilmar meets an unrelated regulatory requirement to
increase its public shareholding. 
    To fulfil this obligation, Adani Enterprises and related
entities first plan to sell their remaining 13% stake in Adani
Wilmar to external shareholders. 

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Graphic: Singapore's Wilmar outperformed its venture with Adani 
  https://reut.rs/3BPK7s3
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 (Editing by Una Galani and Aditya Srivastav)
 ((For previous columns by the author, Reuters customers can
click on  BOSE/ 
shritama.bose@thomsonreuters.com))