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Edible oil major Adani Wilmar Ltd (AWL) initial public offering (IPO) will open for subscription on 27 January, Adani Enterprises said in an exchange filing on Thursday.

"With reference to our earlier intimation dated 2 August, 2021 in relation to the IPO of Adani Wilmar, Adani Enterprises has been informed that the red herring prospectus filed with the Registrar of Companies on 19 January and approved by it on 20 January, the company said in a filing.

Adani Wilmar is a 50:50 joint venture company between the Adani group and the Wilmar group.

Adani Wilmar has cut the size of its initial share-sale to 3,600 crore from the 4,500 crore planned earlier. The company, which sells cooking oils under the Fortune brand, has only reduced the portion of general corporate purposes and not reduced the core objects of the issue

The issue will be open for subscription by the public on 27th January and shall close on 31 January, Adani Enterprises said.

Further, the price band for the issue, which will be decided by AWL in consultation with the book running lead managers, will be advertised at least two working days prior to the issue opening.

Out of the IPO proceeds, 1,900 crore will be used for capital expenditure, 1,100 crore will be used for the repayment of debt and 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).

This indicates the operating leverage and efficiency the company is able to demonstrate through minimal investment and it also suggests the revenues the company is able to churn at minimum capital employed and generate returns.

Despite the issue size reduction, the company will be flooded with high cash generation as it will repay the full long term borrowing of 1,100 crore and save on interest cost and also fund the entire capex (capital expenditure) requirement through equity.

AWL, which is among the leading food FMCG companies in India with revenues of 37,195 crore, plans to aggressively look at M&A (merger and acquisition) prospects in the foods space. The company may acquire a brand or a company engaged in foods, staples and value-added product categories.

Currently, six Adani group companies are listed on domestic bourses. Apart from Adani Enterprises, other listed ones are Adani Transmission, Adani Green Energy, Adani Power, Adani Total Gas, and Adani Ports and Special Economic Zone.

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