Adani Wilmar IPO: Deciphering the hidden universe of the giant FMCG

Edible oil brand Fortune may be a household name in Indian households, but that barely scratches the surface, when it comes to its parent Adani Wilmar (AWL). The 50/50 joint venture between Ahmedabad-based Adani Group and Wilmar International of Singapore is not only billionaire Gautam Adani’s flagship consumer goods company. It is also one of the country’s largest Fast Turning Consumer Goods (FMCG) giants which has now gone public.

According to its management, the plan is to list the company on the stock exchange during this year, as it aims to raise Rs 4,500 crore in the market by issuing new shares. Currently, two promotion entities – Adani Commodities Ltd (subsidiary of Adani Enterprises) and Lence Pte Ltd (subsidiary of Wilmar International) each own nearly 57,174 crore of shares (with a par value of Rs 1 each) in AWL. Of the proceeds from the IPO (initial public offering), Rs 1,900 crore will be used in capital expenditures and Rs 500 crore in “financing of acquisitions and strategic investments”. It will also help pay off Rs 1,170 crore of his debts.

With operating revenue of Rs 37,090 crore in 2020-2021, the company managed to grow its revenue at an impressive rate (25% year-on-year) in a period that was otherwise disruptive, for the least. But what’s more fun is its ability to stay under the radar. In an age when valuation-based valuations and high-voltage branding exercises are catching investor attention, much like an iceberg, AWL’s vast business empire remains mostly below the surface.

Incorporated in January 1999 in the flood plains of the Sabarmati River in Ahmedabad, Adani Wilmar (AWL) has become the largest player in edible oil in the country over the past two decades. It currently occupies leading positions in the soybean (n ° 1), mustard (n ° 1) and palm oil (n ° 2) segments. Its dominance in the largest FMCG category – edible oil – in the country, whose annual sales are estimated at nearly Rs 5 lakh crore, is surely AWL’s greatest asset.

Illustration: Pragati Srivastava

But its presence in international markets, core categories of the packaged food industry and trade are some of the lesser-known facets. In 2020-2021, AWL generated over 5,000 crore rupees (nearly 15% of its revenue) in overseas markets. While its industry essentials business segment, comprising mainly castor beans and other raw materials and edible oil derivatives, contributed some Rs 4,700 crore, or about 13%, to its turnover.

In the food business, according to Angshu Mallick, Managing Director and CEO of AWL, the company now ranks second and third in the branded wheat flour and rice markets, respectively. And at 18.3 percent, its market share for packaged edible oils is far ahead of competitors like Ruchi Soya (8 percent), Emami (6 percent) and Cargill (4 percent).

Illustration: Pragati Srivastava

Edible oil has been its core business since its inception, but Mallick says after finding its mark in the packaged commodities market, which it entered in 2014, AWL is now becoming aggressive in the ready-to-cook segment. fast growing. AWL made a foray into space last year and packaged sugar this year.

With 18 refineries, 10 crushing units and 28 toll units, it relies on AWL’s unique ability to seamlessly integrate its supply points and production units. It is a highly import sector and more than 65 percent of edible oil raw materials are shipped within the country. And having the shipping ports under the umbrella of the group is AWL’s biggest advantage in terms of operational efficiency over its rivals, he says. In fact, many of its factories are strategically located near ports operated by Adani, such as in Mundra in Gujarat.

To further increase its production capacity, “AWL is currently setting up an integrated plant in Gohana (Haryana) with a capacity of 400 tonnes per day (TPJ) of rice bran oil, 100 TPD of mustard oil, 200 TPD of wheat flour, 576 TPD of paddy at the rice line. This will be funded by the show’s proceeds and will be completed by 2024, ”Mallick told Business Today.

With a distribution reach of over 1.6 million physical outlets, its flagship Fortune brand now reaches over 90 million or one-third of all Indian households, the company said.

Once listed, AWL will become the third largest listed FMCG company by revenue, behind ITC and Hindustan Unilever. However, despite its tremendous performance in terms of revenue, its profitability may remain a concern for many investors.

According to the company, its earnings before interest, taxes, depreciation and amortization (EBITDA) grew 20.2% compound annual growth rate (CAGR) between fiscal 2015 and fiscal 2020, just behind the big F&B Nestl̩ India (22.8% CAGR). But its EBITDA margin fell to 3.8% in FY2021 from 4.8% and is lagging behind most other FMCG majors. This, despite the reduction in its capital expenditure (capex) by the company. In fiscal 2021, its capital expenditure stood at Rs 460 crore, up from Rs 910 crore two years ago. While the net profit margin improved to 1.77 percent Рdue to the deferral of tax debts in fiscal 2021.

Illustrations: Pragati Srivastava

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