July 22, 2024
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Stock Market

Should you invest in edible oil stocks and How does the future look like?

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Stock Market

Should you invest in edible oil stocks and How does the future look like?

Have you ever wondered about the secret ingredient behind every delicious dish, the fuel for sizzling stir-fries and flaky pastries? It’s the edible oil – the silent unsung recipe of the culinary world. This sector acts as the lifeblood of every kitchen bringing every individual farmer, distributor and scientist to add flavor to our table.

They boost a nation’s economy by generating employment, finding global trade routes and forming international partnerships. As the world’s appetite towards flavors and nutrition grows, the edible oil industry is said to evolve.

Without any further delay, let’s try to have a look at the future of the edible oil industry in India and look at some specific companies that are involved in this industry.

Industry Overview

India ranks as the fourth-largest producer of edible oil and acts as a prominent player in the global oilseeds market. India cultivates a variety of edible oil seeds such as soybean, groundnut, sesame, sunflower, mustard and niger seed. Even after having 20.8% of the global cultivation area, India accounts for only 10% of global production due to the dominance of rainfed farming by small farmers.

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Which significantly contributed to lower productivity. Despite this, the industry has shown good growth in recent years. Production of edible oil seed has started increasing steadily and gave a compounded annual growth rate (CAGR) of 7.3% from 2015 – 2023. This growth happened as a result of various government programmes and improved cultivation technologies.

The nation also exports oilseeds like mustard, groundnuts, soybeans and sesame seeds. India’s exports have been growing consistently with a 20% increase, resulting in Rs 10,900 crore in 2023. To improve this industry the government is actively supporting the industry through various initiatives like the National Food Security Mission (NFSM) and has recently announced Atma Nirbhar Oil Seeds Abhiyan in the interim budget 2024 – 2025 to achieve self-sufficiency in production and reduce the dependency on imports.

List Of Companies In the edible oil Industry

Marico Ltd

Marico Ltd is an International consumer goods company, established in 1988 under the name of Marico Foods Limited in Mumbai. The company manufactures and sells its products in areas like Health, Wellness and Beauty. Their product portfolio includes hair care, coconut oil, skin care, edible oils, grooming products and fabric care.

Currently, the company is operating in more than 25 countries and has a dominant presence in emerging markets across Africa and Asia. They export their products to countries like Malaysia, South Africa, Egypt, Bangladesh and Vietnam.

Future plans of Marico Ltd

Marico Ltd targets to have a consistent 20% + CAGR in the medium term and aims to double its scale in the Food business by FY 27. They expect their food products like Soya Chunks Honey and Oats to continue growing in double digits. Marico focuses on diversifying and de-commoditizing there with an accelerated push in the Premium Personal Care and Foods segment. The company wants to invest Rs 80 – 100 crore for the next 3 years to undertake their “Project Setu” to expand its distribution reach.

To drive consistent growth in its core edible oil brands like Parachute and Saffola the company is focused on leveraging its price power, managing input costs and capitalizing on favorable market trends. They wanted to maintain their position in this segment through brand-building initiatives and strategic pricing actions.

Patanjali Foods Ltd

Patanjali Foods Ltd company was formerly known as Ruchi Soya Industries Limited and was incorporated in 1986 in Uttarakhand, India. Patanjali is an Indian consumer goods company which specializes in producing and marketing edible oils, soya foods and other FMCG products. The company has 22 manufacturing units in India and exports its products to countries like Japan, Vietnam, Indonesia, Europe and Malaysia.

Future plans of Patanjali Foods

The company wanted to achieve Rs18,000 – 20,000 crores in the next 3 years with growth in its FMCG business. Patanjali aims to maintain consistent volume growth of 4 – 6 % in their edible oil segment. They wanted to expand their palm oil plantations from the current 75,000 hectares to over 300,000 hectares within 4 years. Patanjali considers its palm oil business as a significant profit center and believes it can potentially achieve Rs 400 – 500 crores with the EBITDA margin in the next 5-6 years and Rs 1,000 crores in 7-8 years.

Patanjali with its distribution network currently has a reach of nearly 4 million outlets and exports to over 34 countries. To complement their traditional distribution network the company is actively building their e-commerce and direct-to-consumer (D2C) channels. They also plan to leverage their distribution network to cross-sell various products including Home & Personal care products.