Decision to sell Adani Wilmar stake seals Adani Group’s shift to core infra
Adani Wilmar means the stake sale will provide handy cash to the group as it ramps up infrastructure business. There are other reasons why the Adanis may be looking to exit the FMCG space. For starters, the bulk of Adani Wilmar’s business is in edible oils, which account for 84% of its revenues (with industrial fats adding another 11%).
Packaged groceries account for a mere 5% and it is not a significant player in branded basmati rice, which accounts for the bulk of food FMCG revenue. This heavy dependence on edible oil is a double-edged sword. India is the world’s largest producer and consumer of edible oils, which means there is a readymade market for the product.
India’s edible-oil market stood at $4.2 billion in FY23 and is projected to grow at a compound annual growth rate (CAGR) of 1.5% through to 2029, according to a Techsci Research report. However, demand far outstrips supply, making domestic players heavily dependent on imports. The edible-oil marketing year in India starts in November.
India imported an estimated 16.6 million metric tonnes in the previous marketing year (which ended on October 31, 2023), according to provisional estimates. The global edible-oil market is volatile, subject as it is to the vagaries of climate change, as well as demand from importing countries led by India. Prices can fluctuate greatly in a year.
Add to this the weakening rupee, which hit a historic low of 83.29 against the US dollar in October 2022 and has remained around that level ever since, despite repeated interventions by the RBI. The edible-oil market is also subject to a lot of policy risk. Since edible oils are an essential item and have an effect on food inflation, the government intervenes often to check prices
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