Post-Adani exit, Wilmar to emulate ITC; leverage cash-cow oil business to expand FMCG portfolio

New Delhi: Adani Wilmar Ltd (AWL), India's largest edible oil company, is adopting a strategy similar to ITC's by leveraging its core business and extensive distribution network to drive growth in its high-margin FMCG portfolio after the Adani group exit, according to sources.

Just as ITC used its strong cigarette business to expand into FMCG, AWL is set to use its dominant edible oil business as a foundation for FMCG growth.

Following the exit of the Adani Group, Wilmar may further capitalise on this approach by introducing more global FMCG brands into the Indian market, sources aware of the matter said.

In the December quarter, AWL's FMCG business achieved a 24 per cent year-on-year growth in volume, underscoring its efforts to expand both its food and FMCG product offerings. Consequently, the share of food and FMCG in overall volumes increased to 20 per cent, while its share in total revenues rose to 9 per cent, up from 10 per cent and 5 per cent, respectively, in FY21.

This shift mirrors the strategy pursued by ITC.

"In the foods category, key packaged products such as wheat flour, rice, nuggets, pulses, poha, and sugar have experienced robust double-digit growth," the company had stated in a filing with stock exchanges recently.

"Our integrated distribution model is helping us capitalise on the strength of our oil distribution network to expand the reach of our food products, particularly in urban markets. E-commerce (including quick commerce) sales also grew rapidly by 41 per cent year-on-year." AWL, through its edible oil business (primarily under the 'Fortune' brand), has developed an extensive distribution network that reaches 2.1 million outlets. Although, the share of the edible oil segment is seeing a steady decline, it still accounts for approximately 80 per cent of the company's revenues, with 10 per cent coming from B2B sales.

Due to higher oil prices -- up 25 per cent in the three months ended December -- revenue from this segment grew 39 per cent year-on-year. Meanwhile, food and FMCG revenues grew 22 per cent for the quarter.

As a result of strong performance across segments, AWL's total revenues for the quarter increased 33 per cent, against analysts' expectations of 10-15 per cent.

On December 30, billionaire Gautam Adani's group announced its exit from Adani Wilmar, selling its entire stake to the Singaporean partner and in the open market for over USD 2 billion in a first major deal since the US bribery indictment.

Adani Enterprises Ltd -- which held 43.94 per cent stake in Fortune brand cooking oil, wheat flour and other food product maker Adani Wilmar Ltd -- sold 31.06 per cent stake to Wilmar International.

The remaining about 13 per cent holding will be sold in the open market to meet minimum public shareholding requirements.

Adani will sell up to 40.37 crore shares (31.06 per cent stake) to Wilmar at no more than Rs 305 apiece to net Rs 12,314 crore. Adding the share sale through OFS, whose price will determined on the day of sales, the total proceeds will exceed USD 2 billion (about Rs 17,100 crore).

Following this deal, Wilmar International is expected to introduce its global brands into the Indian market.

On Friday, AWL's stock closed at Rs 328.8, down 0.56 per cent from the previous day's close.

Established in 1999, Adani Wilmar makes Fortune brand cooking oil, wheat flour, pulses, rice and sugar. It owns 23 plants across 10 states.

In India, Wilmar Sugar and Energy Pte Ltd, part of Wilmar Group, has a 62.48 per cent stake in the listed entity Shree Renuka Sugars Ltd, one of the leading producers of sugar in the country.