Orkla Considers Initial Public Offering for Indian Unit by 2025 Amid Global Expansion Plans

Orkla, a Norwegian industrial investment firm, is considering an initial public offering (IPO) for its Indian division by 2025. This unit includes the well-known spices and condiments brands MTR and Eastern. The company is also expanding its global sales, focusing on the Indian diaspora abroad. Orkla India CEO Sanjay Sharma mentioned that they anticipate international business to account for 20% of their revenue in 2024.

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In 2007, Orkla ASA acquired MTR Foods, a packaged foods company based in Bengaluru, India, for USD 80 million. Currently, Orkla's revenue stands at approximately Rs 2,300 crore. The MTR brand contributes 48%, Eastern accounts for 34%, and the rest comes from international markets. The company has seen growth rates of around 12-13% recently.

International Expansion and Market Focus

Orkla India is targeting nine key international markets to strengthen its presence. MTR focuses on the South Indian diaspora, Eastern targets the Malayali community, and Rasoi Magic caters to Punjabi and Gujarati diasporas. Exports currently make up about 18% of their total business, with expectations to increase this to roughly 20% due to higher growth in exports.

The company is also venturing into cold chain-based food products like idli batter and regional delicacies. This move aligns with rising discretionary incomes and consumer demand for fresh food options. They have introduced products such as Malabar Parota and are expanding into ready-to-eat sweets.

Domestic Market Developments

Orkla India is optimistic about the festive season's potential for growth, especially with the onset of festivals like Onam in Kerala. Despite challenges from consumption drops and high food inflation earlier this year, there are signs of recovery. Consumption increased from 4% to 7% last quarter, although market impacts are yet to be fully realised.

The company is enhancing its product range by launching a new line of ready-to-eat sweets from Karnataka. Previously focused on mixes, MTR aims to broaden its footprint in the sweet category with this new portfolio.

Future Prospects and Strategic Moves

The possibility of an IPO was discussed after a pre-IPO study conducted by Orkla's board in late June and July during Europe's summer holidays. Sharma stated that any decision regarding accessing capital markets in India would likely be made by 2025.

Orkla acquired the Eastern brand in 2021 and plans to transform it into a comprehensive food company. Currently, 90% of Eastern's portfolio consists of spices and condiments. The aim is to diversify its offerings further into the food sector.

The company remains encouraged by strong performance in Kerala markets during festive seasons. With food inflation slowing down, Orkla India hopes for a successful festival period ahead.