SUSHIL FINANCE UPCOMING IPO UPDATE - ORKLA INDIA LIMITED

IPO Details

Our View: Subscribe for Long Term Horizon

Company Overview

Orkla India Ltd. a multi-category Indian food company with operations spanning several decades, offering a diverse range of products that cater to every meal occasion, from breakfast and lunch to dinner, snacks and beverages and desserts. Their products, under brands MTR and Eastern, are crafted with authenticity and tradition, and are deeply rooted in the South Indian culinary heritage. The key product categories they offer are Spices (comprising blended and pure spices), and Convenience Foods (comprising ready-to-cook (“RTC”), ready-to-eat (“RTE”) foods and Vermicelli, among others).

Their portfolio comprises approximately 400 products across these categories, as of June 30, 2025, and sold approximately 2.3 million units on average every day as of June 30, 2025. It exported products to 45 countries (including through deemed exports), as of June 30, 2025, with a focus on geographies such as the Gulf Cooperation Council (“GCC”) countries, the US and Canada. The company’s Eastern brand has maintained its position as India’s largest exporter of branded spices for 24 consecutive years. As of June 30, 2025, their distribution network comprised 834 distributors and 1,888 subdistributors across 28 states and six union territories. The company owns and operates 9 manufacturing facilities in 4 states in South India, with a total installed capacity of 182,270 TPA. It also has arrangements with 21 contract manufacturing facilities.

Key Highlights

Objects of the Issue

Our View

The company was originally incorporated as MTR Foods Ltd as a public company in August1,996, at Bengaluru. The name was changed to MTR Foods Private Limited on conversion to a private limited company in August 2008. On conversion to a public limited company in April 2025, the name was changed to Orkla India Limited. According to the Technopak Report, their brands, MTR and Eastern, are the most widely distributed brands in Karnataka and Kerala for spices.

The brands have a presence in 67.5% and 70.4% of the outlets respectively, versus an industry average of 30-40%, according to the Technopak Report. From Fiscal 2023 to June 30, 2025, they have added 15 products in the Spices category and 27 products in the Convenience Foods category. The company is the market leader in the packaged spices market in Karnataka and Kerala, with market shares of 31.2% and 41.8% in FY2024. It is also the second largest player in Andhra Pradesh and Telangana, with a 15.2% market share in packaged spices.

However, Risks to consider are volatility in the pricing of raw materials and packaging materials, Intense Competition, Regional Concentration, any real or perceived contamination in the products or raw materials, dependence on suppliers for raw materials, risks inherent in international sales and operations internationally, Legal and Regulatory Risks could have an adverse effect on business, prospects, financial performance and cash flows.

On the financial front, the company’s Revenue grew at CAGR 5% from FY23 to FY25 while, Profit declined from FY23 to FY25 and stood at ₹ 255.69 Cr. and ₹ 78.92 Cr. at Q1FY26. EBITDA margin expanded from 14.4% to 18.7%. ROCE stood at 8.9% and Total Borrowings stood at ₹ 2.33 Cr. in Q1FY26.

The issue is priced at a P/BV of 5.18 based on its NAV of Rs. 141 as at Q1FY26 and if we annualise FY26 earnings, the P/E stands at ~32x. As per RHP industry average P/E is around 90x. and the only listed peer is Tata Consumer Products Limited. The issue seems fully priced.

Orkla India Limited is a virtually debt free company, makes healthy return ratios and growing global reach with ~120% cash conversion. It outperforms FMCG peers like Tata Consumer. Looking at all the factors, risks, opportunities and valuation, investors can invest with Long term horizon to the issue.