Annapurna Swadisht Set to Acquire Madhur Confectioners for Expansion
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Mumbai, September 2024: Annapurna Swadisht, with a market capitalization of approximately ₹800 crore, has announced its acquisition of Madhur Confectioners Private Limited (MCPL), a renowned manufacturer of a wide range of confectionery products, including flavored candies, lollipops, toy chocolates, and more. This acquisition is part of Annapurna's strategic expansion, aimed at capitalizing on its strong presence in the eastern part of India, where it has already established a significant foothold in the ₹5/- MRP snacks segment.
Annapurna has successfully leveraged its brand and product quality to outpace unorganized players in the eastern market, where major brands have been reluctant to enter. The company has experienced rapid scale-up due to high demand that consistently outstrips supply. Recognizing a gap in product variety, Annapurna's management introduced a diverse range of offerings, providing distributors with a comprehensive product basket that allows retailers to source everything from a single supplier. This strategy has positioned Annapurna as a dominant player in an underpenetrated market, where it anticipates continued rapid growth.
Madhur Confectioners Pvt.Ltd: Strategic Growth and Competitive Edge
Madhur Confectioners is poised for significant expansion, leveraging its existing infrastructure to scale operations by 3.5x to 4x within the next 2-3 years. The company benefits from bulk purchasing, enabling cost advantages through better pricing and reduced logistics costs. Operating on a negative working capital model, Madhur secures 90% advance payments, maintaining strong cash flow with an average monthly order book of ₹7-10 crore. Centrally located, the company has easy access to a PAN India network for both raw materials and finished goods distribution, further enhancing its competitive edge.
The acquisition of MCPL brings significant synergies, particularly in distribution, cost management, and product offerings. Annapurna currently has a distribution network of 550 distributors for its snacks segment, while MCPL adds another 300 distributors for confectionery products. This expanded network is expected to further boost sales volumes through cross-selling, thereby increasing market reach and share.
From a cost perspective, Annapurna operates at an EBITDA margin of approximately 11%, while MCPL enjoys a higher adjusted EBITDA margin of 17.6%. The combined scale of operations is anticipated to reduce per-unit costs, leading to margin improvement for the entire entity.
Moreover, the acquisition will diversify Annapurna's SKU (Stock Keeping Unit) portfolio, combining 75 SKUs from the snacks segment with 31 SKUs from the confectionery segment. This larger SKU portfolio is seen as a win-win for both Annapurna and its distributors, providing a ready market for new SKUs and offering distributors a better return on investment in terms of time, effort, and cost.
Annapurna's industry growth has outpaced the market, with the snacks segment growing at 25-30% compared to the industry average of 10.5%, and the confectionery segment expected to grow at 50-60% versus the industry average of 12-14%. This rapid growth is attributed to the company's strong execution ability, continuous new product launches, and the expansion of its distributor network.
Currently, MCPL operates at a modest 30% capacity utilization, generating sales of around ₹107 crore in FY24. With this acquisition, Annapurna plans to boost MCPL's capacity utilization, aiming for peak revenue of approximately ₹400 crore by FY27. The company expects MCPL to grow at a faster rate than Annapurna Swadisht itself, further enhancing the overall growth trajectory of the parent company.
Key Financials:
For FY24, Annapurna Swadisht reported revenue of ₹265 crore with an Adjusted EBITDA margin of 10.6% and a Profit After Tax (PAT) of ₹14 crore. In comparison, MCPL recorded revenue of ₹107 crore, with a higher Adjusted EBITDA margin of 17.6%.
Looking ahead to FY27, Annapurna expects to generate revenue between ₹900 crore and ₹1,000 crore, with an anticipated EBITDA margin of 15-16%.
Annapurna Swadisht's business is built on a frugal model, with strategically located plants near customers to optimize logistics costs. This efficiency, combined with the company’s strategic expansion into new product lines through acquisitions like MCPL, underscores Annapurna's commitment to scaling its operations and solidifying its market presence in the coming years.
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Topics : product quality
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First Published: Sep 07 2024 | 11:35 AM IST
