Fundamental Analysis of Adani Wilmar: Part of the Adani Group, Adani Wilmar Ltd. is one of the few stocks that most investors regret not purchasing on its listing date. The list is even longer of people who sold the stock at a good listing gain of over 65%. Since then the stock has only increased in value, imitating the saga of IRCTC’s gains to its investors.
So, despite all the rallies, does it still make sense to invest in Adani Wilmar? In this article, we attempt to answer that question by conducting the fundamental analysis of Adani Wilmar Ltd.
Fundamental Analysis Of Adani Wilmar
Today we are conducting a fundamental Analysis of Adani Wilmar consisting of a company overview, business segments, industry overview, financials, future plans, and key metrics, let’s start.
Company Overview
Part of the ports to power conglomerate the Adani Group, Adani Wilmar Ltd. or AWL is an Indian FMCG company offering a diverse set of essential kitchen commodities: edible oil, wheat flour, rice, pulses, and sugar. The company was incorporated in January 1999 as a joint venture between the Adani Group and the Wilmar Group.
The Adani Group is well known to everyone already. As for the Wilmar Group, it is Asia’s leading agribusiness and also one of the largest listed companies by market capitalization on the Singapore Exchange.
Adani Enterprises, the flagship company of the Adani empire, and the Wimar Group hold a 43.97% stake each in the company. The balance of 1.50% and 10.56% are held by DIIs and the public shareholders respectively.
Adani Wilmar Ltd. has 23 own plants across 10 Indian states and 30 third-party units. It has a workforce of 5,500 employees and a large network of more than 7,300 distributors serving 113 million households in the nation through 1.6 million retail touchpoints.
The company houses well-known brands such as Fortune, Kohinoor, Fryola, and Wilpuff as part of its portfolio.
The size and strength of Adani Wilmar’s operations can be judged by the fact that it is India’s largest manufacturer & exporter of castor oil. Not only this, but it is also the largest importer of crude edible oil.
We got a good overview of the company. Let us now move ahead to understand the company’s business segments as part of our fundamental analysis of Adani Wilmar Ltd.
Business Segments
‘Fortune’ cooking oil is a household name in India. Along with edible oil, the company has two more business segments. Let us get an understanding of the business segments of AWL:
- Edible Oil: The company offers a wide range of edible oil products including mustard oil, groundnut oil, cottonseed oil, blended oil, soybean oil, palm oil, sunflower oil, rice bran oil, vanaspati, and specialty fats.
- Food & FMCG: This is the second retail offering of AWL that covers a vast range of packaged foods such as wheat flour, sugar, refined wheat flour, wheat flour, rice, besan, and soap.
- Industry Essentials: Industry essentials make up the second largest revenue stream for the company. The company produces oleochemicals that serve as chief ingredients for various products: soaps, detergents, cosmetics, and polymers. Additionally, the company also manufactures castor oil and lecithin.
The table below presents the operational revenue of the business segments and their share for the financial year 2021-22.
| Business Segment | Operational Revenue (Rs. Cr.) | Percentage |
| Edible Oil | 45,400.77 | 83.74% |
| Food & FMCG | 2,621.24 | 4.84% |
| Industry Essentials | 6,191.54 | 11.42% |
| Total | 54,213.55 | 100.00% |
Industry Overview
India’s food processing industry is the sixth largest in the world. The country’s packaged food industry was valued at Rs. 6,00,000 crore in FY20. It is projected to grow at a CAGR of 12.09% every year during the FY2020-24 period.
However, in terms of the total food and grocery industry, its share stood merely at 15% of the total Rs. 39,45,000 crore. Bringing home another point, India’s annual per capita consumption of all kinds of packaged food is only Rs. 4,650, way behind China’s and USA’s Rs. 16,000 and Rs. 1,12,500 respectively.
The above three figures highlight the large headroom India’s packaged food industry has in terms of future growth. This will be majorly driven by the increasing GenZ workforce, rising income levels, preference for convenience, and greater accessibility brought by e-commerce and organized retail.
Adani Wilmar – Financials
Revenue and Net Profit Growth
Adani Wilmar has grown organically over the years. It has nurtured its ‘Fortune’ brand of cooking oil very well resulting in strong brand equity and cross-selling benefits of other packaged goods.
In the past, the company would have brief periods of acquisition activities. For instance, from 2003 to 2013 AWL acquired 11 edible oil units. After a pause of three years, from 2016 to 2016, the management conducted the acquisition of 3 manufacturing facilities. Since 2019, it has purchased 3 more sites and expanded to Bangladesh.
The revenues of Adani Wilmar have grown at a CAGR of 14.72% every year for the last five years. As for the net profit, it grew at a pace of 16.59% annually. The table below presents revenue and net profit growth for the last five years along with the operating and net profit margins.
| Year | Revenue (Rs. Cr.) | Net Profit (Rs. Cr.) | OPM (%) | NPM (%) |
| 2022 | 52,361 | 808 | 3 | 2% |
| 2021 | 37,090 | 655 | 4 | 2% |
| 2020 | 29,657 | 395 | 4 | 1% |
| 2019 | 28,802 | 365 | 4 | 1% |
| 2018 | 26,354 | 375 | 4 | 1% |
A casual observer may reject Adani Wilmar Ltd. as an overvalued company with a high P/E ratio of 116 and low-profit margins. However, a different perspective demands attention.
The asset turnover ratio of the company for FY22 stood at 11 times. This signifies that the company is a volume player with low margins.
Additionally, the management is excessively focused on increasing the market share of the food and FMCG division. Despite generating almost 5% of the total revenues for the company, the division reported a small loss of Rs. 22 Crore.
Thus, we can expect more earnings and better margins in the future as the food and FMCG division matures in the coming years.
Return Ratios and Debt Figures
Adani Wilmar went public this year in February. It used the proceeds from its IPO to bring down its debt-to-equity ratio from 0.89 to 0.34 in FY22. This places the FMCG company in a good financial spot with a stable interest coverage ratio of 3.53 times.
It has attractive return on capital and net worth ratios highlighting the strength of its operations and brand power as an FMCG business. The table below shows 5-year return ratios.
| Year | ROCE | RoNW |
| 2022 | 27% | 19% |
| 2021 | 23% | 25% |
| 2020 | 26% | 17% |
| 2019 | 29% | 19% |
| 2018 | 38% | 25% |
Adani Wilmar – Future Plans
So far we looked at the past five-year numbers of the company. While all that is good, it provokes the question, “What’s ahead?”
- The management is focused on increasing the international footprint of the company. During FY22, revenue from outside India stood at Rs. 5,265 Crore or 9.7% of the total revenues of Rs. 5,4214 Crore.
- AWL has been keen on reducing its dependence on the edible oil business for the last few years. Although small presently, it plans to increase the share of the food & FMCG division over the next few years. It plans to acquire businesses and fuel growth through inorganic mode.
- During FY22, the company invested Rs. 521 Crore towards capacity expansion. This is 12.67% more than its capital expenditure of Rs. 462 Crore it did in its previous fiscal year. Thus, this highlights the management’s focus on growth.
Fundamental Analysis Of Adani Wilmar – Key Metrics
We are almost at the end of our fundamental analysis of Adani Wilmar Ltd. Let us have a quick look at its key metrics.
| CMP | Rs. 726 | Market Cap (Cr.) | 94,500 |
| Stock P/E | 116 | Face Value | Rs. 1.0 |
| ROCE | 27% | Book Value | Rs. 56.8 |
| RoNW | 19% | Price to Book Value | 12.8 |
| Debt to Equity | 0.34 | Promoter Holding | 88% |
| Net Profit Margin | 2% | Operating Profit Margin | 3% |
| Interest Coverage Ratio | 3.53 | Dividend Yield | 0.0% |
In Conclusion
We are now at the end of our fundamental analysis of Adani Wilmar. As we read above, its shares got listed at a premium of over 65% when it went public in February. Since then, the stock has given a return of 90.55% and a multi-bagger return of 215.65% when taken from its allotment price of Rs. 230 per share.
We can say that, with its price-to-earnings ratio at 116, the company has increased responsibility to deliver to the expectations of its investors.
Thus, good volume growth of its food and FMCG division in particular, along with general volume growth will be required to catch the future gains in stock price. Otherwise, the stock price may fall or remain at similar levels due to dampened prospects.
How about you tell us in the comments below your perspective of Adani Wilmar Ltd.? Is it a growth story or an overhyped stock?
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