A subsidiary of Norway’s $11 billion consumer-goods major Orkla ASA, the company sells over 2.3 million packs daily across 400 products, from spices to ready-to-eat meals. Though rooted in south Indian culinary traditions, its reach extends to 45 countries, with exports contributing more than a fifth of revenue.
Orkla entered India in 2007 by acquiring Karnataka-based MTR Foods from its founding family, and in 2021, it bought Kerala-based spices brand Eastern, founded by the Meerans.
The listing will test whether investors see Orkla India as the next fast-moving consumer goods (FMCG) breakout or a regional player with limited national heft. Strong profitability and operational discipline support the case for re-rating, but muted top-line growth, underused capacity, and geographic concentration remain clear drags.
Mint brings the lowdown on Orkla India’s IPO, its growth ambitions, and what’s at stake as it takes on larger FMCG rivals.
Profitability and peers
Despite some margin softening, Orkla India’s profitability and operational efficiency remain strong. Its net profit margin declined from 15.6% in FY23 to 10.7% in FY25, yet still outpaces Tata Consumer Products’ 7.3%. Ebitda margins, too, have consistently exceeded Tata Consumer’s over the past three years, underscoring pricing power and cost discipline.
Cash conversion improved sharply—from 85% in FY23 to 124.8% in FY25—signalling tighter working-capital discipline and stable input costs. The metric, calculated as net operating cash flow before tax divided by adjusted Ebitda, shows how efficiently profits turn into cash.
However, top-line growth has lagged. Revenue grew at an annualized 5% since FY23, compared with Tata Consumer’s 13%. After two years of sharp spice inflation, prices have since cooled, and deflation along with weak urban demand has weighed on sales.
“The top line looks a little muted, but we don’t believe we’ve hit growth saturation,” said Sanjay Sharma, managing director and CEO, Orkla India, told Mint. “Historically, we’ve delivered double-digit growth—13% between 2010–20…The recent dip stems from two years of sharp spice inflation and a consumption squeeze in India. However, our volume growth hit 8.5% in Q1FY26, showing stronger consumer penetration. We protect margins through pricing discipline and value promotions.”
Chief financial officer Suniana Calapa said that the company has been improving Ebitda margins year-on-year, driven by its shift towards value-added categories like blended masalas and convenience foods, which now constitute 75% of its portfolio.
Calapa added that the company is streamlining manufacturing operations, outsourcing lower-value products, and using digital tools to improve efficiency.
At the upper price band, Orkla India’s implied valuation of about 35x earnings is well below Tata Consumer Products’ 90x multiple, leaving scope for post-listing re-rating.
“The company remains virtually debt-free and generates steady annual cash flows of ₹300-400 crore, supported by healthy margins and robust return ratios. At the upper price band of ₹730, Orkla India is valued at 34.6x its FY25 earnings, which appears fairly valued,” said Sunny Agrawal, DVP & head of fundamental desk at SBI Securities.
Agrawal has maintained a neutral view, preferring to monitor performance post-listing.
Tata Consumer Products Ltd is the only listed peer, according to Orkla’s red herring prospectus.
In FY25, Orkla India reported revenue of ₹2,395 crore and net profit of ₹255.7 crore. About 66.6% ( ₹1,571 crore) of its revenue came from packaged spices, while the remaining 33.4% ( ₹787 crore) was generated from convenience foods such as ready mixes, desserts, and beverages.
In comparison, Tata Consumer Products posted revenue of ₹17,618 crore and profit of ₹1,287 crore.
Operational drag
Despite strong brand equity, capacity utilization remains low. In FY25, utilization stood at 46%, slightly down from 47.7% a year earlier. Of an annual capacity of 182,270 tonnes, production reached just 83,596 tonnes—signalling underuse across newer facilities.
The Bommasandra (Laban) unit, in Bengaluru, operated at only 5.6% utilisation in the June quarter, while Adimali-1 (Chukku Kapi) and Kothamangalam plants, Kerala, ran below 10% due to commissioning delays. Even the new Tumkur plant underperformed in its first full year.
“People think we’re a regional player with limited capacity, but that’s not the case,” said Sharma. “We have nine units and 46% utilization—mainly due to the Eastern acquisition (acquired in 2021). We don’t need major capex for five years; just ₹20-30 crore annually for balancing and food safety. We’re consolidating into 4-5 large factories while outsourcing low-value products. That will drive utilisation efficiency.”
According to Harshal Dasani, business head, INVasset PMS, “The underuse reflects pre-emptive capacity creation, not operational slack. As new verticals scale and exports rise, utilization crossing 55-60% will be a key trigger for margin expansion.”
Regional imbalance
A deeper challenge lies in the company’s geographic concentration: southern India contributed 70% of FY25 revenues, underlining its limited national footprint.
“It’s not that we aren’t available elsewhere,” said Sharma. “Food preferences are highly regional—what works in Karnataka may not in Gujarat. Our strategy focuses on depth, not uniformity. We tailor offerings like sambar, rasam, and puliyogare to local tastes. That’s why 70% of sales come from the South, where our products are daily essentials.”
The packaged spices market in India consists of leading brands, private labels, and trade labels. Leading players include Orkla India (MTR and Eastern), Everest, MDH, and Aachi Masala, among others. The top eight players collectively represent approximately 57% of the overall packaged spices market by value. Private labels include brands by retailers such as Reliance Retail and BigBasket.
“This southern dominance is both a moat and a constraint. Replicating success in northern and western markets requires investment in distribution and localization. Early efforts via modern trade and e-commerce are promising, while exports provide an offsetting growth lever. A calibrated national expansion could reduce concentration risk without compromising profitability,” Dasani added.
That contrast is stark against peers that have used acquisitions to build a pan-India footprint.
Even as Orkla India continues to focus on southern markets—where MTR and Eastern remain strongest—rivals are racing to build national brands in packaged spices and ready-to-cook foods.
ITC acquired east India-based Sunrise Foods for ₹2,150 crore in 2020, a brand now dominant in Assam and growing in West Bengal, ITC Foods’ executive director Hemant Malik told Mint earlier this year. ITC also markets spices under its Aashirvaad label.
Meanwhile, Dabur bought north India-focused Badshah Masala in 2023, Wipro Consumer Care acquired Kerala-based Nirapara in 2022, and Tata has been selling spices under its Sampann and BigBasket’s private-label brands.
Regulatory cloud and trade exposure
Orkla India disclosed 124 pending cases under the Food Safety and Standards Act (FSSA), covering labelling errors and minor quality deviations. Analysts, however, view these as routine.
“These are typical procedural cases for large FMCG firms,” said Dasani. “There have been no product recalls in recent years, implying strong internal controls. Unless adverse rulings arise, they shouldn’t materially affect valuation or consumer trust.”
Exports are another growth lever but carry global trade exposure. Sales to the US rose to ₹74.6 crore in FY25 from ₹56.3 crore in FY23. “Earlier, MTR and Eastern ran separate export operations,” said Sharma. “Now we’ve unified them under one international team. On tariffs, the impact is limited—the US forms only 3% of our business. Our affluent customer base and affordable price points ($1.99–$4.99) mean even a 50% tariff hasn’t significantly hurt demand.”
Dividend surprise
The company’s first-ever dividend of ₹600 crore in FY25—more than twice its annual profit—raised eyebrows for its timing just weeks before filing draft IPO papers. The payout exceeded its FY25 net profit of ₹255.7 crore, with ₹540 crore going to Orkla Asia Pacific and ₹30 crore each to co-promoters Navas Meeran and Feroz Meeran.
“In 2024, we had about ₹1,000 crore surplus cash and equal net worth. Our advisors felt such surplus wouldn’t be valued post-listing. Importantly, Orkla hadn’t taken a dividend for 17 years,” said Sharma.
Dasani noted that while the timing raises governance questions, “This is better read as capital repatriation from a debt-free, cash-rich parent. Post-listing clarity on future dividend policy will be crucial for investor confidence.”
“The board have discretion to declare a dividend, but doing so just before the IPO & The timing of such a hefty payout could create apprehension among investors,” said Kranthi Bathini, equity strategist at WealthMills Securities
Opportunities ahead
Orkla India’s core categories—packaged spices and convenience foods—offer large headroom.
Its prospectus estimates the total addressable market to grow from ₹42,400 crore in FY24 to ₹78,100 crore by FY29, an increase of about 84%. Packaged spices are projected to grow at a 12.3% CAGR to ₹61,500 crore, while convenience foods may expand at 16% annually to ₹16,600 crore.
However, competition in both segments is intensifying. In branded spices, ITC, Everest, MDH, and several strong regional players like Sakthi Masala and Ramdev are expanding aggressively with new product lines and wider distribution. The convenience food space, meanwhile, is drawing increased attention from Tata Consumer, Haldiram’s, and Nestlé, further intensifying the fight for shelf space and consumer loyalty.
Whether investors bite may depend on how fast Orkla India can scale beyond its southern bastion without diluting margins—a challenge that has long defined India’s fragmented food market.
