IPO Note : Orkla India Ltd by Nirmal Bang Ltd
BACKGROUND
Orkla India Ltd is a multi-category Indian food company that offers diverse range of products catering to every meal occasion (breakfast – lunch - dinner and snacks – beverages – desserts). It mainly operates under its two key brands ‘MTR’ (veg) and ‘Eastern’ (incl. non-veg), which are deeply rooted in the South Indian culinary heritage. The key products categories are – i) Spices, and ii) Convenience Foods. It has a portfolio ~400 products across categories.
Details of the Issue:
Total issue is of ~Rs. 1,667 Cr (at upper price band), as offer for sale from its promoter company, Orkla Asia Pacific Pte. Ltd. and other investors.
Investment Rationale:
* Expand Household Penetration and Market Share in Core Regions
* Drive International Expansion and Export Growth
* Broaden and Premiumize Product Portfolio
* Enhance Operational and Capital Efficiency
* Pursue Strategic Acquisitions and Partnerships
Valuation and Recommendation:-
Orkla India Limited, a subsidiary of Orkla ASA, a Norway-listed, consumer-focused industrial group, which has acquired MTR Foods in 2007 and Eastern Condiments in 2020 with majority stake. The Company will continue to focus on exploring opportunities to acquire promising brands in the similar space for its growth, while maintaining growth in its existing business based on its strategy of driving penetration in its core domestic regions and exports. The management expects to be consistent with its long term historical growth in the future. In the recent past performance (during FY23-25), topline performance was impacted due to deflation in RM prices (decline in Chilli prices by ~30% passed onto the consumers, resulting in lower sales); however, operating margins have improved backed by lower RM prices, improved product mix and operational efficiencies. The company recorded a 3.5% volume growth in FY25, which further accelerated to 8.8% in Q1FY26, reflecting improving demand momentum
We expect Orkla India to deliver double digit growth over the next two to three years backed by focus on product innovation, distribution expansion in core markets as well as international markets. Further, GST led tailwind to drive the consumption demand in Indian market. The issue is available at 34.5x to FY25 EPS which is at discount to average packaged food industry valuation of ~68x. Thus, we recommend to SUBSCRIBE to this issue.
Please refer disclaimer at https://www.nirmalbang.com/disclaimer.aspx
SEBI Registration number is INH00000176
