Adani Wilmar, one of India’s largest edible oil and food processing companies, saw its shares jump over 5% on Friday after the government announced an extension of lower import duties on crude edible oils until March 2025.
Adani Wilmar Benefits From Extended Tax Relief on Edible Oil Imports
Shares of Adani Wilmar Ltd (AWL) closed 5.2% higher at ₹365.10 on the BSE after the government said it would allow the import of crude palm oil, crude sunflower oil and crude soybean oil at lower tax rates until 31 March 2025.
The current lower duty structure on imported edible oils was originally set to expire in March 2024. The extension gives AWL over a year more of favorable taxation on its imported raw materials.
As one of the largest edible oil refiners and food processors in India, AWL is expected to benefit significantly from the continued tax relief. Lower input costs will help protect margins and support profitability.
JV Between Adani Group and Wilmar International
Adani Wilmar Ltd is an equal joint venture formed in 1999 between Indian conglomerate Adani Group and Singapore’s Wilmar International. Both groups hold an equal 43.97% stake in the company.
The diverse business has become a leading manufacturer of edible oils, food products like wheat flour, rice, pulses, and sugar in India. It reaches consumers under the popular Fortune brand.
Financial Performance Affected by High Edible Oil Prices
AWL reported a net loss of ₹130.73 crore in Q2 FY24, compared to a net profit of ₹48.76 crore in Q2 FY23. Revenue from operations also dropped 13% to ₹12,267 crore.
The decline has been largely driven by the correction in high edible oil prices over the past year. Despite an 11% growth in sales volume this quarter, revenue fell due to the price drop.
Import duties were raised in 2021 to curb rising cooking oil prices caused by global supply chain disruptions. This benefited producers like AWL but hit consumer sentiment.
Stock Price 58% Below All-Time High
AWL shares hit an all-time high of ₹878 in November 2021 at the peak of the edible oil price rally. The extension of import duty benefits helped drive a 3.9% intraday gain to ₹365.10 on Friday.
However, the stock remains 58% below its historic peak amidst broad-based selling across Adani Group companies following fraud allegations by short-seller Hindenburg Research in January 2023.
Improving Credit Metrics Across Adani Group
Adani companies, including AWL, have exhibited improving credit metrics in the first half of FY24. Total cash reserves rose 14% to ₹45,895 crore, while gross debt was unchanged at ₹2.26 lakh crore.
Higher earnings across ports, power, mining and other businesses boosted consolidated EBITDA by 25% to ₹71,253 crore. The results highlight the group’s solid operating performance despite market turmoil.
As one of India’s leading agriculture and food companies, AWL stands to benefit from tax incentives that lower input costs. While uncertainty hangs over Adani shares, improving fundamentals and government policy changes could catalyze a recovery.