ADANI WILMAR

On cusp of surpassing HUL

A 50:50 joint venture between the Ahmedabad-based Adani group and the Singapore-headquartered Wilmar group – one of the largest agribusiness companies in Asia – it is a leading FMCG company in India offering essential kitchen commodities like edible oil, wheat flour, rice, pulses and sugar. These products are being offered under various brands like Fortune, Bullet, Jubilee and Alpha. The company also markets packaged foods and personal products like soaps, handwash and sanitisers. It is also a leading manufacturer of industrial essentials like oleo chemicals, castor oil, de-oiled cakes, stearic acid and glycerin. Besides marketing all these products throughout the country, Adani Wilmar exports its products to around 50 countries.

The company is doing very well on the financial front and its future prospects are all the more promising.

Consider:

• Within a relatively short time, it has emerged as the second largest FMCG company in the country after Hindustan Unilever. It is the largest domestic producer of edible oils and manufactures various edible oils, including soyabean oil, sunflower oil, mustard oil, groundnut oil, palm oil, cottonseed oil and vanaspati. In fact, edible oils account for around 65 per cent of the company’s turnover. In industrial essentials, the company is the largest supplier with a 32 per cent marketshare overall and a 20 per cent marketshare in glycerin.
• A plus point for Adani Wilmar is its extensive distribution network. It has distributors spread over 28 states and 9 union territories, with over 16 lakh retail outlets — which works out to around 35 per cent of all retail outlets in India.
• The company’s growing business is well reflected in its financial performance. During the last five years, its sales turnover has expanded from Rs 23,083 crore in fiscal 2017 to Rs 37,090 crore in fiscal 2021, with the profit at net level shooting up from Rs 230 crore to Rs 655 crore during this period.
• The company’s financial position is sound, with reserves at the end of March 2021 standing at Rs 2,952 crore as against its equity capital of Rs 114.30 crore. The company’s debt burden has been on the decline during the last three years, declining from Rs 2,620 crore to Rs 1,904 crore. Taking into account the cash equivalents of Rs 1,183 crore, the net debt works out to Rs 716 crore, which is quite manageable and can be eliminated in a year or two, making the company a totally debt-free entity. Obviously, the interest burden last year was reduced to Rs 40,651 crore from Rs 568.60 crore in the previous year.
• Unlike most of its competitors, Adani Wilmar’s roots are deeply embedded in two of the largest businesses in their respective fields of expertise —Singapore-headquartered Wilmar International and the Adani group. Wilmar controls nearly 30 per cent of the world’s edible oil business, with its tentacles spread across continents — giving it a unique leverage when it comes to price negotiations and allocation of raw materials. For its part, the Gautam Adani-led Adani group owns India’s largest private sea port operator — Adani Ports and Special Economic Zone (APSEZ). That plays an important role in ensuring a seamless supply of raw materials at the company’s facilities across the country.
• At the pace with which Adani Wilmar is growing, it may surpass even Hindustan Unilever to become the numero uno FMCG company in India. During the first nine months of fiscal 2022, it was ahead of Hindustan Unilever with a sales turnover of Rs. 39,254 crore (HUL’s comparable revenue was Rs 38,679 crore). This is for the first time after decades of dominance by HUL that there has emerged the possibility of a new market leader.

The company is an excellent buy with a longterm perspective. Bank of America’s research wing puts the target price of /// Rs 900/1000.

CONSOLIDATED PERFORMANCE INDICATORS (Rs. in crore)

BIRLASOFT

Pole player in multi-IT segments

Over a quarter century old, Birlasoft, a global infotech company, is part of the CK Birla group, a $ 2.3 billion conglomerate with interests in industry segments ranging from cement, auto components, precision bearings, paper, building materials, consumer durables, IT-enabled services and heavy engineering equipment. The group is present across five continents and has 41 manufacturing facilities, 21 delivery locations and over 25,000 employees. Though a small cap entity, Birlasoft features in the top 100 IT companies recognized by The International Association of Outsourcing Professionals (IAOP). Today, the company is addressing the next wave of globalisation to deliver accelerated technology solutions with a focus on value and innovation.

Birlasoft is a multi-shore business application global IT services provider with a presence in the US, Europe, Asia Pacific and India. It operates development centres in the US, China, Poland and India. It counts Fortune 100 enterprises across sectors like manufacturing, banking and financial services, insurance, media and healthcare as its clients.

The company is steadily going from strength to strength on the financial front. During the last five years, its sales turnover has expanded from Rs 1,350 crore in fiscal 2017 to Rs 1,641 crore in fiscal 2021 with the profit at net level inching up from Rs 169.29 crore to Rs 193.56 crore during the same period. Its financial position is very strong, with reserves at the end of March 2021 standing at Rs 1,338 crore — over 24 times its paid-up equity capital of Rs 55.46 crore, that too after making 1:1 bonus issues twice – in 2006 and 2012. What is more, the company is paying handsome dividends, the rate for the last year being a hefty 200 per cent. Prospects going ahead are highly promising.

Consider:

• Birlasoft enjoys an established position in the BFSI, hi-tech, media, energy, utilities and life sciences segments. It also has a well-established client base which includes large, global organisations. The company has a long track record in the IT consulting business, a reputed client base, and alliances to drive business growth. Higher utilisation, pyramid rationalisation and cost optimisation can help report strong revenue and profitability growth going forward. Large deal flows and cross-selling can provide revenue visibility for the next few years. The recent improvement in margins looks sustainable.
• The company can boast of a healthy deal pipeline to drive double-digit revenues. The company is witnessing healthy traction in cloud migration, app modernisation and workplace modernisation. Further, the company has partnered with Microsoft to drive cloud migration. In addition, the company has improved its annuity revenues by 67 per cent and is targeting 70 per cent in 2022. This, coupled with a healthy deal pipeline and a focus on multi-year deal wins, gives Birlasoft the confidence of achieving double-digit revenues in fiscal 2022. In addition, the company’s client mining, a healthy order book, a focus on niche verticals, crossselling opportunities and expansion in Europe and Asia Pacific bode well for long-term revenue growth. Dollar revenues are expected to increase at a CAGR of 9.4 per cent in fiscal 2022. What is more, sustained improvement in margins is expected going forward.
• In 2019, Birlasoft was merged with KPIT, which led to restructuring of the company. KPIT had two business verticals – ITeS and engineering. Later, the combined company was demerged into two companies — Birlasoft with the IT business and KPIT Engineering with the engineering business.

Birlasoft is now all set to go from strength to strength. A strong client base and strategic alliances will expand business. Today, the company has around 400 active clients in multiple verticals across various industry segments. The company is a good investment bet on account of its sound fundamentals led by robust debt metrics, healthy liquidity and an attractive dividend yield.

PERFORMANCE INDICATORS (Rs. in crore)