On August 2, Adani Wilmar registered multiple internal and external probable risk factors that could affect the business significantly in the Draft Red Herring Prospectus (DRHP) issued with market regulator Securities and Exchange Board of India (SEBI). The company filed draft papers for its 4,500 crore initial public offering (IPO).
The potential risk factors presented by the company are:
> Modern trade networks like hypermarkets, supermarkets and online retailers may deeply hinder the pricing ability, which can simultaneously deter the operations and financial condition of the company.
“India has recently witnessed the emergence of supermarket and hypermarket chains and online retailers and the market penetration of large-scale organized retail in India is likely to increase further. While we believe this provides us with an opportunity to improve our supply chain efficiencies and increase the visibility of our brands, it also increases the negotiating position of such stores. We cannot assure you that we will be able to negotiate new distribution agreements or renegotiate our existing distribution agreements going forward, especially our pricing or credit provisions, on terms favourable to us, or at all,” Adani Wilmar added.
> Wilmar meticulously noted that the intensity of competition could perhaps degrade its market share volume.
“Competition in the industries in which we operate could result in a reduction in our market share or require us to incur substantial expenditure on advertising and marketing, either of which could adversely affect our business, results of operations and financial conditions,” Wilmar averred in a note.
> The company firmly showcased the drawbacks of this unprecedented crisis that heavily impacted the pricing of its products.
“Although the prices for our products had risen due to them being food, industrial and essential commodities which are non-discretionary in nature, as well as due to the increase in stockpiling of such products, we cannot assure you that the prices of our products will not be adversely affected by the COVID-19 pandemic,” Adani Wilmar stated in the DRHP.
> Adani Wilmar asserted that in case if the inflation rate keeps rising in India then hiked rates could influence the profit margin to decline rapidly.
“High fluctuations in inflation rates may make it more difficult for us to accurately estimate or control our costs. Any increase in inflation in India can increase our expenses, which we may not be able to adequately pass on to our clients, whether entirely or in part, and may adversely affect our business and financial condition, he concluded”