Adani Group has created a $1 billion war chest aimed at boosting the group’s food and FMCG business in the country’s growing market for packaged consumer goods. As part of the plan, the group’s fast moving consumer goods business under Adani Wilmar Ltd is in talks to buy at least three spices, ready-to-cook food and packaged edibles brands in the country’s south and east, sources said on condition of anonymity.
This is the Adani Group’s most aggressive capex plan for the maker of Fortune Oil and Kohinoor rice, a joint venture with Singapore’s Wilmar Group. While the group is seeing renewed interest from large global and domestic investors, the FMCG business is seeing a surge in demand. “The group is targeting 25-30 per cent of its revenue coming from direct consumer facing businesses like food, FMCG, commodity and airport business. This is a long term target and currently, the group’s cash position is right to consider any capital expenditure,” sources said.
Plans to make multiple acquisitions in two to three years
Adani Wilmar will make several acquisitions in the next two to three years, two of the people said. A 50:50 joint venture between Adani and Wilmar, it offers a range of food and FMCG products, including kitchen staples such as edible oil, wheat flour, rice, pulses and sugar. Its flagship brand Fortune reaches 113 million households. In 2022, Adani Wilmar acquired packaged rice brand Kohinoor.
An email sent to an Adani Group spokesperson seeking comment did not elicit a response. However, in a recent interaction with Mint, a top Adani Group official said, “As we had already indicated, this (joint venture with Wilmar) is an investment that we are completely happy with. They (Wilmar) are our long-term partners, and this can be a big business. And, whatever we do is as per our plans discussed with Wilmar. As far as planned acquisitions are concerned, I am aware of the investments that Adani Wilmar wants to make.”
“Adani Group may invest around $1 billion for capex in the FMCG business. The value of each of these acquisitions could be in the range of $200-500 million,” the first person said. Adani Wilmar had a revenue of ₹51,261.63 crore in FY24.
Plan to buy a company
“The group is planning to acquire a company from South India engaged in spices and ready-to-cook food business. Another company that the group is planning to acquire is from East India. Both are very reputed names. The planned acquisitions could help the group gain an immediate foothold in the two regions,” a source said.
The stock that will make you rich is going to split into 5 pieces, tomorrow is a big day
Competition from Hindustan Unilever and Godrej Consumer Products
Leveraging a strong distribution and retail network, strong brand equity, robust sourcing capabilities and extensive manufacturing presence across India, Adani Wilmar is optimistic about becoming the country’s largest food FMCG company. Adani competes with Hindustan Unilever and Godrej Consumer Products in the FMCG sector.
Adani Wilmar presentation revealed that India’s organised packaged food retail market, valued at around Rs 6 trillion. This is just 15% of the total food and grocery retail market, which is estimated at around Rs 39.45 trillion. The growing demand for packaged foods on the back of changing consumer preferences is forcing FMCG players to rapidly expand and diversify.
Rising Shares
Adani Wilmar shares have risen 27% to Rs 363 now from a low of Rs 285.85 in November last year. Adani Wilmar reported a revenue of Rs 14,169 crore in the June quarter as against Rs 12,928 crore a year ago. The company’s consolidated net profit stood at Rs 313.2 crore as against a net loss of Rs 78.92 crore in the same quarter a year ago. Revenue from food and FMCG business grew 40%. It mainly comprises oil, wheat flour and rice under the Fortune brand.
Better-than-expected revenue in the first quarter
Adani’s presentation said that currently, the total addressable market for packaged staple food products is around 300 million tonnes, with edible oil consumption at 23 million tonnes. Both sources said that with the group’s cash position improving, the shares of group companies rising and the FMCG business reporting better-than-expected revenue in the first quarter of this fiscal, the group has formulated new plans to grow the food and FMCG business in an inorganic way.
Organic growth in food and FMCG business
The FMCG business generated higher-than-expected revenues in the June quarter, led by organic growth in the food and FMCG business, sources said. Adani Wilmar is currently building a plant in Gohana, Haryana to expand the food business. “Adani will target much higher volumes. Adani Wilmar will get its own in-house supply chain once the Gohana plant is ready.
“With all the growth plans within the food business, Adani Wilmar is expecting 30-40% year-on-year growth in volumes for the next three years,” the second person said. Over the past year, Adani has expanded its food delivery reach by 18% to sell at 740,000 outlets covering 30,000 villages and towns. Adani aims to make food delivery accessible across various Adani portfolio and partners through the Adani One app.