Why Adani Wilmar Share Price is Falling

Since January 2023, most Adani Group stocks have consistently been in the limelight.

It's almost a year since the Hindenburg report was released and we still don't know who's having the last laugh.

The Indian market regulator is still looking into probes and allegations against the group.

Back when the report was released, one particular stock from the group was not so heavily beaten down as other group companies - Adani Wilmar.

But the stock is currently in a difficult situation, down over 50% in 2023.

Adani Wilmar, a product of the collaboration between the globally renowned Adani Group and Wilmar International, has come under serious selling pressure.

In just one month, the stock has experienced a loss exceeding 14%. Meanwhile, the shares have tumbled by more than 60% from their 52-week high of 750.

Here's why.

#1 Weak Q2 Results

Adani Wilmar faced a challenging second quarter, with its revenue from operations experiencing a 13.3% year-on-year (YoY) decline, falling from Rs 141.5 billion (bn) to Rs 122.7 bn. Despite a reduction in total expenses to Rs 124.4 bn during the quarter, the losses persisted.

The company reported a net loss of Rs 1.3 bn for the September 2023 quarter, against Rs 490 million (m) profit recorded in the same period the previous year.

Earnings before interest, taxes, depreciation, and amortisation (EBITDA) stood at Rs 1.5 bn, marking a 43% YoY decrease from Rs 2.5 bn in the last fiscal year. The margin also experienced a decline of 0.6%, dropping from 1.8% to 1.2%.

The edible oil segment faced challenges due to varying trends in spot and future prices, with edible oil prices witnessing a notable 6% decrease during the quarter.

On a positive note, the food & FMCG segment saw a substantial 26% growth in revenues, and the industry essentials business recorded a commendable 25% year-on-year growth.

While Adani Wilmar's edible oil segment displayed a 5% volume growth over the previous year in Q2 of FY24, the value growth saw a concerning 19% decline.

This segment contributes around 74% to the company's revenue, playing a significant role in shaping the overall performance.

Despite strong double-digit volume growth, the company observed a decline in the sales value on a year-on-year basis. Consequently, Adani Wilmar's shares experienced a downward trend.

Adani Wilmar's management has expressed optimism, anticipating a return to normal levels of profitability for edible oils in terms of gross margin and EBITDA per ton in the coming quarter.

The company expects the food & FMCG and industry essentials segments to maintain their profitability momentum.

#2 Adani Group's Divestment Report

According to media reports, the Adani Group is currently in discussions regarding the potential sale of its entire 43.9% stake in Adani Wilmar, with the deal expected to be finalised within a month.

The conglomerate is reportedly seeking US$ 2.5-3 bn (Rs 208.3 bn) for its stake in the joint venture.

Adani Wilmar, recognised for the popular Fortune brand of edible oils, is a joint venture between the Adani Group and Singapore-based Wilmar International, with Wilmar also holding a 43.8% stake. The joint venture was established in January 1999.

The Adani Group's intention to divest from certain businesses, including Adani Wilmar, is part of a broader strategy to channel resources more deeply into core focus areas such as infrastructure.

The funds generated from the stake sale are anticipated to be reinvested in other ventures rather than used to reduce debt.

These plans align with earlier reports suggesting the Adani Group's consideration of divesting from non-core assets to establish a liquidity buffer, a strategy that gained momentum following the Hindenburg Research report released in January.

In the wake of this development, the promoters have been exploring options for divesting from non-core businesses.

What Next?

Looking ahead, Adani Wilmar is strategically aligning its focus to enhance retail penetration and bolster sales productivity. A key initiative involves extending direct coverage to more rural towns, aiming to tap into previously underserved markets.

The company's forward-looking agenda places a strong emphasis on gaining a substantial share in under-indexed markets, particularly with a targeted approach to improving margins in the consumer pack segment.

Adani Wilmar is set to capitalise on opportunities within the hospitality, institutional, and export markets. The company is actively developing strategies to leverage these markets, recognising them as significant avenues for expansion.

The demographic landscape is also a focal point for Adani Wilmar's plans. With the expanding growth rate of the rising youth population, increasing disposable income, and heightened consumer awareness, the company anticipates positive outcomes.

These factors are expected to contribute to the company's sustained growth. Notably, Adani Wilmar recognises that the urban sector remains the primary contributor to the overall revenue generated by the FMCG sector.

How Shares of Adani Wilmar have Performed

Adani Wilmar's share price is down 14% in a month. So far, in 2023, the shares are trading lower by 51.1%.

In a week, the shares have eroded 4% of their market value.

The company touched its 52-week high of Rs 703 on 9 November 2022 and its 52-week low of Rs 293 on 10 November 2023.

About Adani Wilmar

Adani Wilmar is one of the largest fast-moving consumer goods (FMCG) companies in the country.

Its products include edible oil, wheat flour, rice, pulses, and sugar.

The company has products in three broad categories - edible oil, packaged goods and FMCG, and industrial essentials. The majority of its revenue comes from the edible oil segment, followed by industry essentials, and packaged goods.

Fortune oil, its flagship brand, has the highest market share in the oil segment. The company has the largest distribution network among all the branded edible oil companies in India.

In the industrial essentials segment, the company is the largest manufacturer of basic oleochemicals, stearic acid, and glycerin. It's also one of the largest exporters of oleochemicals in India.

For more details about the company, you can have a look at the Adani Wilmar company fact sheet and quarterly results on our website.

You can also compare Adani Wilmar with its peers.

Adani Wilmar vs Patanjali Foods

Adani Wilmar vs NK Industries

Adani Wilmar vs Gokul Refoils

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