Opinion
Mint Quick Edit | Adani’s food JV exit isn’t hard to understand
Summary
- The Adani group is selling its entire 44% stake in Adani-Wilmar, known for Fortune edible oils and packaged staples, to focus on infrastructure. This divestment follows both management and market logic.
Adani Enterprises Ltd is set to sell its entire 44% stake in Adani Wilmar Ltd, its joint venture with the Singapore-based food processing company Wilmar International.
Estimated to be worth some $2 billion, the equity sale will take place in two steps, with its proceeds expected to be invested in the group’s “core infrastructure" businesses.
Lence Pte, a unit of Wilmar International, will buy 31% of Adani Wilmar’s shares held by Adani Commodities, a unit of Adani Enterprises, which will offload its own 13% holding.
Also read: Diversity and inclusion: A growing factor in mergers and acquisitions
As a consumer-facing business, Adani Wilmar is best known for its Fortune brand of edible oils that was extended to packaged household staples like rice and flour.
With this exit, though, Adani seems to have withdrawn from the food processing sector.
Management theorists often advocate that business groups should focus on fields of “core competence" and not spread their resources too thin by over-diversifying.
Also read: The government’s stake-selling agenda: If not now, then when?
Shares of Adani Enterprises shot up 7.7% on Monday, an indication of investors taking the divestment as a good move.
Given India’s recent failure to ease rigidities in its farm sector, packaged food prospects may also have dimmed lately.
Also read: Bull run effect: Promoters raise ₹62,000 crore via stake sales, highest since 2019
