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