Adani Wilmar plans to buy local food brands with funds from upcoming IPO

Small part of proceeds will also go towards expanding its edible oil capacity in eastern India, where its capacity utilisation is high and the market is growing at a fast pace

Edible oil major, Adani Wilmar is looking to acquire food brands along with using the amount it raises via its initial public offering (IPO) to expand its capacities in the food segment.

“Capacity expansion is mostly going to be in the food segment, because that is where we are concentrating and that is where bulk of the IPO proceeds are being used,” Angshu Mallick, MD & CEO at Adani Wilmar, told Business Standard.

He added that a small amount of its IPO proceeds will also go towards expanding its edible oil capacity in eastern India where its capacity utilisation is high and the market is growing at a fast pace.

On acquisitions, Mallick said the company is always open to evaluating proposals, but its attention will be towards food as the segment gives it better opportunities as there are more regional and local players. Post acquisition, the company is looking to scale up such brands and take them national.

“If any good brand is available with good products at a local level, we can scale up and take it to a global level as well because we have an export department which works on it,” Mallick said.

In edible oils, Mallick explained that acquiring a brand may not be of as much importance as food as Adani Wilmar already has established brands like Fortune and a couple more masstige brands.

In its red herring prospectus (RHP), Adani Wilmar has said that it will utilise Rs 450 crore from its net proceeds towards strategic acquisitions of manufacturing unit or brands in the food staples business such as wheat flour, rice and besan, ready-to-cook and ready-to-eat segments.

“However, any such acquisitions shall be focused on the broader packaged food industry which may include edible oil, foods & staples, FMCG products, ready-to-cook, ready-to-eat, spices & condiments and may be in the same or complimentary industry or in segments supporting the existing business model, whether in India or outside India,” the company said in its RHP.

The company expects the food business to help expand its margins. “As we move forwards, the food story will add to the bottom line… our absolute margins should grow more than our volume growth,” Shrikant Kanhere, CFO of Adani Wilmar said. Kanhere also said that its margins have been growing in excess of 20 per cent for the last five years.

In the first half of the year, Adani Wilmar saw 12.6 per cent of its sales volume come from packaged foods and FMCG compared to 7.2 per cent in FY19, according to its RHP.

Adani Wilmar is a joint venture between Adani Group and Singapore-based Wilmar group and expects to raise up to Rs 3,600 crore via its initial public offering.