Entry of competitors will open up branded oil market: Adani Wilmar CEO-MD

In a Q&A, Angshu Mallick shares the company's road map towards becoming a nationwide branded food staples consumer major

Having established itself as a formidable packaged and branded edible oil player as well as one of the largest edible oil refiners in the country, Adani Wilmar has now set its sights on the next level of growth. As it prepares to launch its initial public offering (IPO) this year, Adani Wilmar's chief executive officer and managing director Angshu Mallick shares the company's roadmap towards becoming a nation-wide branded food staples consumer major in an interview with Vinay Umarji. Edited excerpts:

What is the size of the IPO and when is it expected? Where will the proceeds of the IPO be used and by when?

The roadshows are also complete since we have had investors' calls. Ee should expect the IPO soon this year. We are raising Rs 4,500 crore primarily for growth and development of the company. Of this, outstanding long-term debt raised for investments will be paid off for Rs 1,100 crore. Secondly, Rs 1,900 crore has been earmarked for strategic investment, mostly in food, such as rice mills, pulses and other value added flour, among other things. Another Rs 500 crore will go in acquisition, mostly in food staples because that is where we intend to build our might now. Food is a much bigger segment but there are not many national players in all major food staples, although some sections like flour may have. There are a lot of advantages being an all-India player such as reliability for consumers, large procurement ability, manufacturing and distribution synergies.

What is your current capacity and how will it change post IPO?

We handled approximately 500,000 tonnes of food staples and three million tonnes of edible oil in FY 2020-21. Food staples have grown much faster than oil. The staples market today is what edible oil used to be 20 years ago in terms of organised branded players. When we started 20 years ago in edible oil, the branded segment was 20 per cent of the total market. Today, it is 87 per cent, whereas the average branded segment is 12 per cent for rice and 15 per cent for wheat flour.

We have 22 plants comprising crushing units and refineries with an aggregate designed capacity of 8,525 metric tonnes (mt) per day and 16,285 mt per day, respectively. In addition, we have 28 tolling units across India to cater to the excess demand and ensure our presence across different parts of the country, which produce mustard oil, rice bran oil, wheat flour, rice, pulses, sugar, soya chunks and khichdi with raw materials we provide.

How much does each business segment contribute to your turnover and how is it set to change?

Currently, our turnover is Rs 37,195 crore. However, we don't see the contribution of these segments in terms of value but volume. Value is not in our control since it depends on government regulated prices on procurement. But when it comes to volume, it is in our control. Currently, 65 per cent of our volume comes from edible oil, 11 per cent comes from food staples and 24 per cent from industry essentials including oleo-chemicals. If we continue to grow at the rate that we have grown in the recent past, then this ratio is going to change, since the past is a reflection of the future.

In the long run, what will drive Adani Wilmar's business?

Everything that we are doing now revolves around food staples. As I said earlier, while edible oil has saturated, there is so much scope in food staples. For instance, we are already into staples like rice and wheat flour. We can now take it further into value added products. Wheat flour or atta and rice can not only get you refined flour (maida) and sooji, but one can also now make vermicelli, pasta, macaroni and noodles out of these staples. We can not only make these value-added wheat and rice products for retail consumers but also for enterprises and caterers. While we are already the largest edible oil refiner, in terms of investment, the same money invested in food staples will now give us much faster growth than in edible oil.

Does the foray of players like Amul in edible oil and food staples pose any competition?

Right now players like Amul (GCMMF) are in food staples and edible oil in a limited regional geography. But if they foray nationally, then it will be good for the industry because it will open up the branded oil and food market much faster, resulting in quicker conversion of unbranded, loose products to packaged. It took 20 years for edible oil to reach 70-75 per cent packaged. If, like us, 3-4 more national players join, food staples might reach the figure in a shorter time.

How will you grow your distribution network? Any direct e-commerce plans?

There are around roughly four million grocery outlets selling packed food in the country. Of these, 35 per cent outlets sell Adani Wilmar products. Most distributed product is oil, followed by flour, rice and sugar. When it comes to oil, we are the largest player. And since oil is our largest distributed product, Adani Wilmar has the largest distribution reach for food staples as well. Going further, we are putting a lot of factories with the IPO money. We will have a lot of regional strength developed wherein we can take stock from one end to the other end of the country without much hassle. This will help us reach rural interior markets.

We are also improving our distribution wherein our products will reach direct to the market via our distributors. Instead of going to the distributor's warehouse, our products will go directly to wherever he or she wishes us to deliver. So the distributor benefits from this direct despatch to the retail since the former's handling reduces and brings in more synergy.

In e-commerce, we did extremely well during the Covid pandemic, growing at around 100 per cent. In a bid to meet the needs of our loyal customers during Covid, we started 'Fortune Online' as an app where one can order Adani Wilmar products online. We are present in 20 cities and plan to be in 100 cities.  

How will procurement and pricing change due to the new farm laws? Are the laws beneficial for the farmers?

Surely, the new farm laws are very friendly. They are advantageous to both companies and farmers. But currently it is in abeyance. Hence, we are still procuring from the mandis and our factories are also allowed to buy directly from farmers because they are endorsed and approved as mandis by paying APMC taxes. For pricing, we abide by the rates declared by the mandis, wherein whoever quotes the higher price in auction gets the product.