Adani Wilmar to use Rs 450 cr from IPO proceeds to tap inorganic growth

FMCG major Adani Wilmar, which has grown to become the largest category leader through acquisitions, has set aside Rs 450 crore from the share sale that opens later this week, to tap more acquisition-led growth opportunities primarily in its non-edible oils business.

The company, which is an equal joint venture between the Adani Group and Singapore's Wilmar Group, is launching a Rs 3,600-crore IPO on January 27.

Its flagship Fortune brand of edible oils is the largest selling brand in the category controlling nearly a fifth of the organised market, and is among the top five fastest growing packaged food companies in the country in terms of revenue, according to a report by the industry tracker Technopak.

The report also says that Fortune controls 18.3 per cent of the retail market, while runner-up brand Ruchi Soya has around 8 per cent.

''We are looking at more inorganic growth opportunities to grow our non-oil/FMCG business. Accordingly we've earmarked Rs 450 crore from the IPO proceeds to acquire manufacturing units or brands in the food staples business such as wheat flour, rice and besan, ready-to-cook and ready-to-eat segments,'' Adani Wilmar chief executive Angshu Mallick told PTI without offering a timeline for the same.

Inorganic growth arises from mergers and acquisitions rather than an increase in a company's business activity.

In the case of Adani Wilmar, acquisitions will be from the broader packaged food industry which may include edible oils, foods & staples, FMCG products, spices & condiments both in the domestic market as well as outside, he said.

Going forward, the company will focus on increasing the market share in the edible oils segment on one hand and grow the food business on the other and an acquisition should speed up the growth process, he added.

''We believe we have the building blocks in place to continue to deliver market leading growth. We will continue to leverage the strengths of our promoters, our strong brand 'Fortune' and our integrated business model to increase our profitability and competitiveness,'' he said.

''When we succeed in becoming the biggest manufacturer of essential food products, we will have the biggest brands and distribution network which can be used to launch smaller volume but higher margin products like noodles, pasta, ready-to-eat, ready-to-cook products,'' he explained.

They are looking to expand the FMCG portfolio to capitalise on growing demand for branded kitchen essentials. Of late, it has been increasing focus on value-added products, to diversify revenue streams and generate higher margins.

The value-added products launched since 2013 include functional edible oil products such as rice bran oil, fortified food, ready-to-cook soya chunks, packaged wheat flour, rice, pulses, besan, sugar, and ready-to-cook 'khichdi'.

The domestic packaged food retail market has been growing 11 per cent annually from FY20 and is expected to touch Rs 10,13,000 crore by FY25 from Rs 6,02,000 crore in FY20, according to Technopak.

Yet the market penetration is low compared to global economies with the annual per capita spend on packaged food only Rs 4,700, compared to Rs 16,000 in China and Rs 1,125,000 in the US.

In April-September 2021-22, its sales stood at Rs 24,957.3 crore as against Rs 16,273.73 crore a year ago and net income at Rs 357 crore, up from Rs 288.78 crore. FY21 revenue was Rs 37,090 crore and net profit was Rs 727.6 crore, according to its RHP filing.

Its product portfolio spans across three categories--edible oils, packaged food & FMCG, and industry essentials. As much as 73 per cent of its revenue have come from edible oils and packaged food and FMCG sales in FY21 and the rest from industry essentials which are as non-branded.

The company has 22 plants across 10 states, comprising 10 crushing units and 19 refineries. Of the 19 refineries, 10 are port-based to facilitate use of imported crude edible oil and reduce transportation cost, and the rest are in the hinterland in proximity to raw material production bases to reduce storage cost. They also have 36 leased tolling units as of September 2021.

Its Mundra refinery is the largest single-location refinery with a designed capacity of 5,000 metric tonnes per day.

Mallick said edible oils contributes 65 per cent of its business in volume terms and the rest come from food and industrial essentials segments and the food business is growing around 25 per cent annually.

After the IPO, which will be a fully primary offer with no offer-for-sale, public shareholding will be 12 per cent and the remaining 88 per cent will be equally held by the two promoters.