Highlights
Adani Wilmar Ltd Adopts New Growth Strategy
Adani Wilmar Ltd (AWL), renowned as India’s largest edible oil company, is embarking on a growth strategy reminiscent of ITC. By capitalising on its foundational business and vast distribution network, AWL aims to enhance its high-margin FMCG portfolio following the exit of the Adani Group, as per informed sources. Just as ITC leveraged its strong cigarette business to expand within the FMCG sector, AWL intends to utilise its leading position in the edible oil market to propel its FMCG growth.
In light of the Adani Group’s departure, Wilmar is poised to further execute this strategy by launching additional global FMCG brands in the Indian market, according to those familiar with the developments.
Impressive Growth in FMCG Segment
During the December quarter, AWL reported a remarkable 24% year-on-year growth in its FMCG business volume, highlighting its successful expansion into both food and FMCG product lines. Consequently, the contributions of food and FMCG to overall volumes surged to 20%, while their share in total revenues rose to 9%, compared to 10% and 5%, respectively, in FY21. This evolution aligns closely with ITC’s growth strategy.
In the food segment, significant packaged products such as:
- Wheat flour
- Rice
- Nuggets
- Pulses
- Poha
- Sugar
have witnessed robust double-digit growth, as disclosed in a recent filing with stock exchanges.
AWL’s integrated distribution model is effectively utilising its oil distribution network to broaden the reach of its food products, especially in urban areas. Additionally, e-commerce sales, including quick commerce, experienced a 41% year-on-year increase.
Distribution Network and Revenue Breakdown
AWL’s edible oil business, primarily under the ‘Fortune’ brand, has established a comprehensive distribution network that accesses 2.1 million outlets. However, despite a gradual decline in the share of the edible oil segment, it still constitutes approximately 80% of the company’s revenues, with 10% derived from B2B sales.
As a result of a 25% rise in oil prices during the three months leading to December, revenue from this division increased by 39% year-on-year, while revenue from food and FMCG sectors grew by 22% for the same period. Due to robust performance across various segments, AWL’s total revenue for the quarter surged by 33%, surpassing analysts’ expectations of a 10-15% increase.
Adani Group’s Exit and Future Prospects
On December 30, Gautam Adani’s group announced its exit from Adani Wilmar, divesting its entire stake to its Singaporean partner and the open market for over $2 billion, marking a significant transaction following the US bribery indictment. Adani Enterprises Ltd, which previously held a 43.94% stake in the Fortune brand’s cooking oil, wheat flour, and other food products, sold a 31.06% stake to Wilmar International. The remaining 13% will be sold on the open market to comply with minimum public shareholding regulations.
Adani will offload up to 40.37 crore shares (31.06% stake) to Wilmar at a price not exceeding Rs 305 per share, generating Rs 12,314 crore. Coupled with the share sale through the OFS, priced on the day of sale, total proceeds will exceed USD 2 billion (approximately Rs 17,100 crore). Following this transaction, Wilmar International is anticipated to introduce its global brands to the Indian market.
As of Friday, AWL’s stock closed at Rs 328.8, reflecting a decline of 0.56% from the previous day’s closing price. Established in 1999, Adani Wilmar produces a variety of products including Fortune brand cooking oil, wheat flour, pulses, rice, and sugar. The company operates 23 plants across 10 states in India.
In India, Wilmar Sugar and Energy Pte Ltd, part of Wilmar Group, holds a 62.48% stake in Shree Renuka Sugars Ltd, a leading sugar producer in the country.
