- FMCG player Adani Wilmar is all set to open its ₹3,600 crore IPO on January 27.
- Inflationary pressure for Adani Wilmar is mostly on edible oil as CEO Angshu Mallick says ‘never seen such higher prices of edible oil in the last five years’.
- The Fortune oil producer intends to grow its geographical presence and is interested in the southern regions where regional companies are strong.
Fast moving consumer goods (FMCG) company Adani Wilmar, known for edible oil ‘Fortune’, is looking to acquire small regional companies with a corpus of ₹450 crore.
The company is one of the leading players in the edible oil segment and is looking to gain more market share further. “We intend to grow our geographical presence. For example, we may pursue acquisitions in the edible oil and food industry to strengthen our presence in the southern regions where regional companies are strong. We intend to consolidate market share through acquisitions of regional players,” the company said in the red herring prospectus.
Not only is the company interested in buying strong edible oil brands, but also firms who are into ready-to-cook, ready to eat or organic food segments, which is gaining a lot of traction, explained chief executive officer Angshu Mallick in an interview to Business Insider.
“We are looking for brands, which are small and regional and with our infrastructure, distribution depth, can we take it to a national level,” said Mallick.
The company has set aside ₹450 crore for any future acquisitions from the ₹3,600 crore IPO proceeds .
|Usage of IPO proceeds||From ₹3,600 crore|
|Capital expenditure||₹1,900 crore|
|Debt repayment||₹1,058.9 crore|
|Funding strategic acquisitions and investments||₹450 crore|
Performance of popular edible oil maker Fortune
Adani Wilmar has a market share of 18.3% in the edible oil business while 60% of the market is still “fragmented”, said Mallick. However, the market may turn around, according to him. “It [60% of the market share] is with small players, local players, regional oil players. Slowly, we see that there is some difficulty for such small players to compete with big players because of the nature of business, risk management policies, price hikes and all that,” said Mallick.
Triggers for the edible oil industry
Mallick pointed out that there are inflationary pressures on the edible oil business as he says “never seen such higher prices of edible oil in the last five years”.
“It was only last year when the agriculture production across the globe was impacted [because of which] the supply chains got disrupted because of which sugar prices went up,” he said.
Sunflower edible oil has now come off from its peak to ₹140 per kilogram from ₹180 earlier. The inflationary pressure will soften in the next six months.
“Going forward, the Indian mustard seed crop is expected in March, which is likely to be a bumper one and that will surely bring a lot of relief to domestic oil mills and crushers because it will improve supply chain domestic oil and international prices will also be subdued. I don’t think the inflationary pressure that we have seen will be seen in the next 6 months,” said Mallick.
The Ahmedabad-based company has witnessed good growth in revenue and profitability in the last three years.
|Adani Wilmar||Revenue||Net profit|