Adani Wilmar Targets To Add 100 Fortune Mart Stores In FY23 — BQ Exclusive

Price-Led Revenue Spike

Adani Wilmar, a joint venture incorporated in 1991 between the Adani Group and Asian agribusiness conglomerate Wilmar International, dislodged Hindustan Unilever Ltd. to becomes India's largest consumer goods maker by revenue.

Adani Wilmar’s revenue rose 46% to Rs 54,214 crore in fiscal ended March, ahead of HUL's Rs 52,446 crore, according to its exchange filing.

Adani Wilmar, however, clocked Rs 804 crore profit in FY22 compared with HUL's Rs 8,892 crore. HUL's operating margin was 24% against Adani Wilmar's 2.8%.

Adani Wilmar's food and FMCG business—where it competes with HUL—is yet to turn profitable.

In FY22, it reported a Rs 22.47 crore loss at a gross level, according to the exchange filing. Yet, revenue rose to Rs 2,621 crore from Rs 1,905.6 crore in FY21.

"We aren’t gung-ho (about overall revenues) as it was due to the spike in edible oil prices…," Mallick said. "The growth has been 46% in FY22, which is not sustainable.”

In the quarter ended March, the company increased prices of edible oils by 30-35% to offset margin pressures, he said.

The cost of materials surged 40% year-on-year to Rs 13,666 crore during the quarter. For the full year ended March, raw material costs were up 49% at Rs 48,214 crore.

“While the growth in the coming quarters will depend on market prices, we are aggressively focusing on volumes,” said Mallick.

In FY22, volume rose 8% to 4.8 million metric tonnes, of which edible oil grew 10% to 3.25 MMT and the packaged food business grew 34% to 0.64 MMT.

Over the next few years, the company expects edible oil volumes to grow at 6-8%, and the staples and food basket to grow more than 30%.

"Edible oil has reached a maturity level but we see opportunity in the branded staple category, which is hardly 11-12% of the entire staple market, unlike edible oil which is 80% branded," Mallick said.

The company expects its food and FMCG business to turn profitable at the net level in three to four years. "As volume grows and the pricing power increases, no one can stop us from making profits," said Mallick.

Scouting For Food Brands, Assets

The Gautam Adani-led company is scouting for acquisitions to scale up the packaged food business, Mallick said. It recently acquired the premium rice brand Kohinoor from McCormick Switzerland GmBH.

The Kohinoor portfolio comprises two more brands—Charminar, catering to the range of products; and Trophy, which is popular in the hotel, restaurant and catering or HoReCa segment. In FY21, Kohinoor clocked revenue of Rs 300 crore.

The deal also gives Adani Wilmar rights over Kohinoor’s ready-to-cook and ready-to-eat curries and meals portfolio. "The packaged food category is underpenetrated with significant headroom for growth," said Mallick.

While Adani Wilmar didn't disclose the deal size, it said the purchase was financed from IPO proceeds. It had earmarked Rs 450 crore for mergers and acquisitions from its Rs 3,600-crore IPO.

Mallick expects the acquisition to “fuel the next level of growth” and widen the portfolio to cater to premium customer segments across rice and ready-to-eat rice-based products, improving margins.

In terms of capacity expansion, Mallick expects the 500-tonne per day wheat flour plant in Bundi, Rajasthan to be operational in October.

The company is also looking to acquire abandoned factories as it expects the food business to grow four times faster in terms of volume than the traditional edible oil business. “There are a lot of stressed assets in the food space with owners struggling to run factories because of working capital constraints or other family issues. We plan to take over such factories… this would help us in multiplying volumes faster.”