Acquired Biz Can Do ₹1,000 Cr Revenue In 3-4 Yrs From ₹400 Cr In FY24: Adani Wilmar | CNBC TV18

Summary

Adani Wilmar's recent acquisition of Manglam, valued at 600 crores, promises significant growth potential, with management forecasting a revenue jump from 400 crores to 1,000 crores over the next 3-4 years. The company plans to improve margins by 300-400 basis points through cost synergies and enhanced sourcing capabilities. However, concerns over the valuation of the remaining 20% stake linger, with an additional cost of 300-400 crores. Additionally, the deal involving Wilmar’s 40% stake sale to Adani Wilmar is pending CCI approval. This strategic acquisition signals future growth but with cautious optimism about its potential upside.

Takeaways

• 😀 Adani Wilmar's latest acquisition is Manglam, which achieved a revenue of 400 crores in FY24.
• 😀 The management believes that with Adani Wilmar's scale and distribution network, Manglam's revenue can grow significantly, potentially reaching 1,000 crores in the next 3-4 years.
• 😀 Along with revenue growth, the management expects cost synergies from the acquisition, estimating a margin improvement of 300 to 400 basis points from their sourcing capabilities and cost reductions.
• 😀 The acquisition price for an 80% stake in Manglam was 600 crores, which translates to about 1.5 to 2 times EV to sales.
• 😀 If Manglam's sales grow to 1,000 crores as projected, the business's enterprise value could rise to between 1,500 to 2,000 crores.
• 😀 The remaining 20% stake in Manglam may cost Adani Wilmar an additional 300-400 crores, approximately 50% of the original price for 80% of the business.
• 😀 The management pointed out that the upside potential from the acquisition is capped, but did not disclose specific pricing details.
• 😀 Adani Wilmar is also awaiting CCI approval for a deal where Wilmar will acquire a 40% stake in the company from Adis.
• 😀 Despite the significant acquisition announcement, there was no significant reaction in Adani Wilmar's stock price.
• 😀 The management emphasized the importance of expanding their product portfolio with value-added products that complement their kitchen essentials, projecting a stronger market position in the future.

Q & A

What was the key topic of the interview with the management of Adani Wilmar?

The key topic of the interview was Adani Wilmar's recent acquisition of an 80% stake in Manglam and their plans for scaling this business. The management also discussed synergies, revenue growth projections, and cost efficiencies.

What was Manglam's revenue in FY24, and what is Adani Wilmar's growth expectation for this revenue in the next 3-4 years?

Manglam's revenue in FY24 was 400 crores. Adani Wilmar expects this revenue to grow to 1,000 to 1,500 crores in the next 3-4 years due to better distribution and scale.

What is expected to drive the revenue and cost synergies for the acquired Manglam business?

The synergies are expected to come from Adani Wilmar’s enhanced distribution reach, sourcing capabilities, and cost management, including improvements in cost reductions and better supply chain practices.

How much does Adani Wilmar expect to improve Manglam's margins over the next few years?

Adani Wilmar expects to improve Manglam's margins by 3-4%, increasing from the current 8% margin to around 11-12%.

What is the enterprise value (EV) paid for the 80% stake in Manglam, and how does this relate to the business's current revenue?

Adani Wilmar paid an enterprise value of 600 crores for an 80% stake in Manglam, which currently generates 400 crores in revenue. This means the EV to sales ratio is about 1.5 to 2 times.

What will be the cost to acquire the remaining 20% stake in Manglam, and why?

The cost to acquire the remaining 20% stake is expected to be between 300 to 400 crores, roughly 50% of what Adani Wilmar paid for the 80% stake. This is based on the future growth of the business and its expected revenue increase.

Why is the management concerned about the upside potential of the Manglam acquisition?

The management is concerned that the upside potential is capped due to the already agreed valuation for the remaining 20% stake, which limits the growth prospects from a valuation perspective.

What is the status of Adani Wilmar's deal to sell its 40% stake in the company to Wilmar?

Adani Wilmar is in the process of selling its 40% stake to Wilmar. The deal is awaiting approval from the Competition Commission of India (CCI), and the approval is expected soon.

How does Adani Wilmar plan to increase the turnover of the acquired Manglam business?

Adani Wilmar plans to increase Manglam's turnover by leveraging its distribution strength, manufacturing expertise, and investments in advertising, brand building, and promotions.

How did the stock market react to Adani Wilmar's acquisition announcement?

Despite the significant acquisition, the stock market did not show a significant reaction, indicating possible investor caution or uncertainty regarding the scalability or future performance of the acquisition.