Adani Group continues asset streamlining with Adani Wilmar divestment talks

The Adani Group is reportedly in advanced discussions with multiple multinational consumer goods companies to divest its entire stake in Adani Wilmar Ltd, according to executives familiar with the matter. This potential deal is anticipated to be finalised within the next month, as reported by the Economic Times.

Adani Wilmar, a prominent company known for selling a wide range of edible oils and food products under the Fortune brand, currently has the Adani Group holding a substantial 43.97 per cent stake in the company. The joint venture between the Adani Group and Singapore-based Wilmar International equally distributes ownership, with both parties holding identical stakes.

Rumours of the Adani Group's intention to sell its stake in Adani Wilmar had surfaced earlier this year. However, at that time, Adani Enterprises had categorically denied any such plans, stating in an exchange filing, "We would like to clarify that as of now, there is no such event concerning the media report, which requires any disclosure from the company side under the Regulation 30 of SEBI Listing Regulations."

The move to divest from Adani Wilmar comes after the Adani Group has explored opportunities to sell non-core assets to create a liquidity buffer. This decision was largely influenced by the Hindenburg short-seller report earlier this year, which led to the abrupt withdrawal of a proposed share sale in the flagship Adani Enterprises. The report had significant impact, resulting in a wealth erosion of $150 billion for investors.

The recent financial performance of Adani Wilmar has also played a crucial role in the group's strategic decisions. The company's results for the September 2023 quarter, released on 1 November, revealed a consolidated net loss of Rs 130.73 crore, a stark contrast to the Rs 48.76 crore net profit reported in the same period the previous year. This decline in profitability was primarily attributed to challenges in the cooking oil business.

The edible oil business contributed 58 per cent to the total volume in the second quarter, while cooking oils accounted for 74 per cent of the total revenue from operations, which amounted to Rs 12,267 crore. Adani Wilmar cited the loss in the edible oil segment, partially offset by better margins in the food & FMCG and industry essential segments, as the main reason behind the adverse impact on profitability. The company highlighted hedging losses owing to divergent trends in spot and future prices of the edible oil segment.

While Adani Wilmar is one of the largest FMCG companies in India by turnover, its significant reliance on edible oils and persistent low profitability has been a challenge.

Group CFO Jugeshinder "Robbie" Singh shared the Adani Group's new strategic focus, stating that they are now concentrating on their core infrastructure business model and adjacencies. Singh emphasised the group’s ambition to raise $50 billion of equity over the next 20 years, with a substantial investment of close to $500 billion in core infrastructure projects as the base case.

To achieve these financial goals, the group is making strategic decisions, including exiting non-core businesses. The potential stake sale in Adani Wilmar is being viewed as a step in this direction. The Adani Group's ongoing evolution and strategic shifts continue to attract attention as they realign their focus on core business ventures in the evolving economic landscape.