Produced by: Tarun Mishra Designed by: Mohsin Shaikh
Adani Group is reportedly in discussions with multiple multinational FMCG firms regarding the potential sale of its entire 43.97% stake in Adani Wilmar. The deal could be finalised within a month, a report by Economic Times suggested.
Adani Wilmar was incorporated as a joint venture between the Adani Group and the Singapore-based Wilmar Group in January 1999. Headquartered in Ahmedabad, Adani Wilmar is engaged in manufacturing of packaged food, edible oils, personal care and industry essentials. It operates 23 manufacturing plants across 10 Indian states and boasts of of pan-India distribution network. The company exports its products to the Middle East, Africa and South East Asia.
The report on Adani’s exit emerged at a time Adani Wilmar posted a weak set of September quarter numbers with revenue falling 13.3 per cent YoY, Ebitda by 43.4 per cent YoY and adjusted loss coming in at Rs 131 crore for the quarter. Adani Wilmar had reported a loss of Rs 79 crore in the June quarter while its profit was down 60 per cent in the March quarter. Edible oil prices have corrected Rs 5,000–6,000 per tonne over the last two–three months. Besides, there are concerns over restrictions on exports of basmati and non-basmati rice.
Adani Wilmar, which was listed on stock exchanges on February 8, 2022, has fallen 10 per cent in the last one month. It is down 48 per cent year-to-date and 55 per cent from its 52-week high of Rs 703 hit on November 2022. The company commanded a market capitalisation of Rs 41,004.86 crore. Recently, Nuvama cut its share price target on the stock to Rs 515 from Rs 600 earlier. The brokerage, however, retained its ‘BUY’ call on the scrip.
The Adani Group, led by Chairman Gautam Adani, is reportedly seeking $2.5-3 billion for its stake in the joint venture. Wilmar International, holds 43.87% stake in the company. As per the report, the Adani Group was in talks with a few consumer goods players and the deal is likely to happen within a month.
The Adani Group was reportedly looking to exit a few businesses to focus on infrastructure, its core area, after the explosive report from short-seller Hindenburg Research almost halved its market capitalisation. Besides, it was reported that the proceeds from the proposed stake sale would not be used to cut debt but to invest in other group businesses.
Adanis and Wilmars benefitted from a strong partnerships so far. Wilmar International, a global leader in edible oils, enjoys significant leverage in price negotiations and raw material allocation. Adani Group, on the other hand, owns India's largest private sea port, ensuring a seamless supply of raw materials to AWL's facilities across India.
Adani Wilmar offers a diverse product portfolio under brands like Fortune, King's, Bullet, Raag, Avsar, Pilaf, Jubilee, Alpha, Alife, and Aadhar. With an extensive range of edible oils derived from sources such as soya, sunflower, mustard, rice bran, among others, the Fortune brand holds a 20% market share in India. Other big players include Ruchi Soya, Emami, and Cargill.
Adani Wilmar operates over 23 manufacturing units nationwide and has an extensive distribution network spanning 1.6 million retail touchpoints. The company also owns and manages 18 refineries in India, with 10 strategically located near seaports, streamlining the supply chain.
Adani Wilmar has expanded its offerings over the years, venturing into packaged products including rice, soya chunks, and flour. It also entered the personal care and Ready to Cook (RTC) products market. As of 2021, the company held an 18.3% market share in the branded edible oil market in India.
Adani Wilmar continued to face challenges with the edible oil segment. The segment saw 4% growth in edible oil volumes in Q2 but saw a 19% YoY decline in revenues. This drop was attributed to the falling prices of edible oil, which has significantly impacted the company's top-line earnings. The share of edible oil segment, which once contributed over 85% of Adani Wilmar's revenue, decreased to 74% by the end of September 2023.
The Adani Group has been making strategic financial moves, including the sale of Adani Capital to Bain Capital and offering part of its real estate portfolio for sale. Conversely, the group has bolstered its presence in the cement business by acquiring Sanghi Cements. These developments reflect the group's dynamic and evolving financial strategy.