Adani Wilmar margins have remained in 2.7- 2.9% levels. But is it fair to say that at least for FY25, the worst is over and from here on there is possibility of those levers for margin expansion?
Angshu Mallick: We have been in that range of 4.5% to 5%. This year has been bad because of the first half of the year. But going forward, the margins are likely to improve. Two-three reasons for this. One is that commodity prices are remaining stable, the brands generally perform better, that is one. And the prices have come down.
So, there is not so much inflationary pressure in edible oil and in other basic foods, that is one. Two, it is also a factor of distribution. How is your reach? The higher the reach, higher is your ability to reach any retailer directly so that you are nearer to the consumer and your ability to price your products higher is always there. That is another place we are working at.
Third is the efficiency of purchase, procurement, processing and transport. All this becomes better as your volume goes up. So, food with one million tonne volume and edible oil at around 3.5 million tonne volume gives us enormous scope to manage the plant efficiency, distribution efficiency, supply chain efficiency and reduce our cost of manpower, advertising and all that. So, going forward, we will have better margin structure.
Foods and FMCG revenues this time round have almost doubled. In fact, in the last two years, we have been seeing a rising trend. What is the outlook from this segment and do you think revenue can come in closer to 5,000 crore?
Angshu Mallick: In this food segment, the big three are rice, both basmati, non-basmati. We have wheat flour, atta, suji, rava, maida, including branded whole wheat. The third driver is the pulses and besan category. Now all these three, if you see, are majorly still today sold in loose condition. So, branded packed shares are hardly 8% to 10%.
That gives us a tremendous advantage in building the brand. We are confident because we have doubled in turnover in two years is an indication that it is possible to grow at this rate faster. Last 10 quarters, we have grown at 30% quarter-on-quarter in domestic business. So, we see a great opportunity as we make more and more inroads into the rural market. We will have strength, that is one. 45% of our branded besan today comes from the rural market. So, you can imagine how if we can push our products in the rural market, we can get more volume. 25% branded sugar comes from there, 25% of rice and 18% of atta sales comes from the rural market and that is where we are trying to push it more.But the other vertical, which is industry essentials, saw volume and a value decline. What is the outlook for FY25 when it comes to this segment? Should we expect growth then?
Angshu Mallick: In industry essentials, we have three main products. One is oleochemical. The oleochemical business has been growing fast and we have done more than 20% growth there. So, the oleo business will continue to grow and there is no problem there. Second is the castor. Castor, we are running the plants at around 95% and we have almost reached the full. We are the world’s largest castor oil player in terms of processing and exports. There also, I do not see any great problem and we have done well. What has been an issue is the oil mean export and oil meal export normally, rapeseed meal and soya meal, soya meal has not been very competitive. So, the business was not doing well because internationally the meals were lower priced.
We had a little tough time in terms of generating volumes. But going forward, as the new mustard season has just started, the new meal, oil meal, rapeseed oil meal will be available now for exports. So, the Q1 of FY25 should be better.
But what sort of top line growth is Adani Wilmar aspiring for across these segments?
Angshu Mallick: Overall, the edible oil has been growing. This year has grown at 10%, which is very good, I would say. We do not normally see double digit growth in edible oil because the category is quite penetrated and it is available, surplus is there. But looking at the next two-three years, we should continue to grow edible oil at around 7% to 10%, depending on which year and at what price. When it comes to food, we have been clocking at around 305. This year, it was 18-19% because of the export problem of rice.
But going forward, we have cracked that in the sense that we are exporting more of basmati rice and all that, but domestic rice business has also increased. So, volume on food, we will continue to clock anything between 25% and 30%. If that happens year-on-year, for the next three to five years, the food business should double, the volume of one million tonnes should become two million tonnes by the end of the fourth year. The volumes will be much higher and better.