Adani Enterprises, the leading firm of the Adani Group, is contemplating the sale of its 43.97% stake in Adani Wilmar (AWL), a major edible oils company and one of India’s top fast moving consumer goods (FMCG) firms. Adani Wilmar, a joint venture between Adani Enterprises and Wilmar International, achieved a revenue of Rs 55,262 crore in FY23, making it the third-largest FMCG company in India, behind only ITC and Hindustan Unilever.Adani Wilmar

The decision to sell comes as part of Adani Group’s shift in strategy, prompted by concerns raised in Hindenburg Research’s report and AWL’s poor profitability over the years. Adani Group’s CFO, Jugeshinder “Robbie” Singh, explained that the focus is now on core infrastructure and related areas. The Group aims to secure $50 billion of equity over the next two decades to invest heavily in core infrastructure. Exiting non-core businesses like financial services has already begun, and the potential sale of AWL’s stake aligns with this strategy.

Despite being a significant player in the FMCG industry, AWL faces challenges in terms of profitability. While it holds a substantial share (19%) of the organized segment of India’s edible oil market (valued at Rs 1.8 lakh crore), its profit margins remain notably lower compared to rivals like HUL and ITC. AWL’s operating profit margin (OPM) is merely 3.39%, and its net profit margin (NPM) stands at 1.1% in FY23. The volatility in edible oil prices has contributed to a decline in AWL’s revenue, with a notable 11% drop in Q1 of FY24 after surpassing HUL’s revenue in FY22.

Adani Wilmar responded to the speculation by stating that it cannot comment on media reports and rumors. The decision to potentially divest from AWL reflects Adani Group’s commitment to reshaping its portfolio to prioritize its core infrastructure business and better align with its long-term equity-raising goals.

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