Adani Wilmar Ltd Q3 FY23 Earnings Conference Call Insights

Key highlights from Adani Wilmar Ltd (AWL) Q3 FY23 Earnings Concall

Q&A Highlights:

• [00:24:17] Manoj Menon from ICICI Securities asked about the drivers of market share gain in Edible Oil. Angshu Mallick MD said the market has not been growing in the first nine months of the year, causing a 1% drop in consumption. Edible oil prices have since cooled down and out-of-home consumption is on the rise. AWL has increased its rural distribution by adding 7,000-8,000 towns and improved its direct reach in urban areas, resulting in improved market share.

• [00:28:21] Manoj Menon from ICICI Securities enquired about the growth YonY in food business being good while sequentially it’s been not so. Angshu Mallick MD said there is a good opportunity for growth in food industry this year due to rising wheat prices, GST normalization of brands, seasonality, and increased out-of-home consumption. This has led to advantages in rice, wheat, maida, besan, and edible oil.

• [00:33:25] Latika Chopra with JP Morgan asked how AWL thinks about sustainable volume growth moving into FY24 in Edible Oil. Angshu Mallick MD replied that the edible oil industry has seen a 6-8% consumption growth from Oct. to Dec., and is expected to see 6-8% volume growth in the coming year. AWL should grow at double-digit. This growth is due to an increase in marriages and out-of-home consumption, as well as lower prices leading to increased in-home consumption.

• [00:36:31] Latika Chopra with JP Morgan queried on realizations in edible oil, if it’s stabilizing now or a correction is anticipated. Angshu Mallick MD answered that prices have corrected downwards. Consumers are accepting prices between INR100 and INR120 per liter. Mustard season is coming next month and with a bumper crop, prices are likely to cool down and improve consumption.

• [00:38:00] Latika Chopra with JP Morgan asked about margins for edible oils if it would move close to 3% odd levels. Shrikant Kanhere CFO answered that if prices remain stable or correct slightly downwards, the margin profile should improve. Additionally, customers who had downgraded from Fortune network may come back, leading to an even greater improvement in the margin profile per ton.

• [00:39:07] Latika Chopra with JP Morgan enquired if a target for FY ’24 regarding revenue and EBIT margins for Industry Essentials could be provided. Angshu Mallick MD replied that this business is a steady state, and this quarter has seen some volatility due to price drops and other factors. The value chain should be able to deliver better margins than Edible Oil, as it delivers products used in the HPC category. Next year should not see such margin drops.

• [00:40:41] Latika Chopra with JP Morgan asked about increase in interest expenses sequentially and if there’s any one-offs. Angshu Mallick MD replied that the LIBOR rate has gone up to 4.75%. Also YoY, the dollar interest costs has increase by 3.5%. This trend is expected to continue for the next one or two years.

• [00:42:04] Latika Chopra with JP Morgan asked about short term borrowing YTD.  Angshu Mallick MD said AWL doesn’t have borrowing as the company doesn’t have a cash backed or fund based drawing. Maximum, AWL has close to INR1,000 crore of borrowings sitting on the balance sheet. Rest all is supplier credit of about $1 billion.