Adani Group is in talks to sell its entire stake in Adani Wilmar Ltd., a company that sells a range of edible oils and food products under the Fortune brand. In the joint venture that was established in 1999, both Adani Group and Singapore-based Wilmar International share equal ownership in the JV. Following an initial public offering (IPO) launched in February 2022 to raise Rs 3,600 crore, both companies' shareholdings were reduced to 43.97 percent each. According to the reports, the deal is expected to be finalized within a month, and the conglomerate, led by Chairman Gautam Adani, is expecting $2.5–3 billion for the stake in the joint venture.
Adani Wilmar, apart from the Fortune brand, also offers other kitchen commodities, including wheat flour, rice, pulses, and sugar. It is the largest lauric fat manufacturer and the largest manufacturer of castor oil in India. Adani Wilmar is also the largest exporter of castor oil and its derivatives. The company has 23 plants across 10 states in India.
Earlier in August, there were rumors that the Adani group was in talks to exit the JV, but the reports were denied, stating that there was no such event concerning the media report.
Adani Group plans to exit a few non-core businesses to invest more deeply in core focus areas such as infrastructure. Proceeds from the proposed sale are likely to be used for investments in other group businesses, not to pare debt. Reports of the group exiting non-core assets to create a liquidity buffer have been doing the rounds for the past few months, following the Hindenburg Research report leading to a $150 billion wealth erosion for investors.
In March, the Adani Group was reported to have put on hold its plans for a $4.2 billion coal-to-PVC (polyvinyl chloride) plant in Gujarat. In emails sent to vendors and suppliers, the group called for them to suspend all activities of the scope of the work and performance of all obligations... till further notice’. This followed an ‘unforeseen scenario’ according to the emails.
Adani Wilmar is one of the largest players in the edible oil segment. Last fiscal year, the company reported a net profit of Rs 607 crore on revenue of Rs 55,262 crore. The company has been posting losses for two consecutive quarters, with a consolidated net loss of Rs 130.73 crore for the July–September quarter. The company's total income fell to Rs 12,331.20 crore during the same period, while the total expenses stood above the revenue, leading to a loss. In volume terms, the company's sales grew 11% to 1.46 million tonnes.
Adani Wilmar, MD, and CEO Angshu Mallick said that while profitability in edible oils was impacted consecutively for the second quarter, they believe that the abnormality will soon reverse. The company said profitability was adversely impacted due to loss in the edible oil segment, which was partially offset by better margins in the Food & FMCG and industry essential segments. Adani Wilmar said that edible oil losses are primarily driven by divergent trends in spot and future prices, resulting in hedging losses.