Zacks_Analysts' Blog : ADM Spreads Wings in India - Analyst Blog

In a bid to enhance its operational roots and expand its global footprints, Archer Daniels Midland Company (ADM), one of the leading food processing companies in the world, has recently made acquisitions in one of the fastest growing economies of Asia, India.

Eying to expand its oilseeds origination network in Central Asia, Archer Daniels has acquired two facilities of Geepee Agri Private Limited in the western part of India, located in the cities of Kota and Akola. The facility at its Kota, Rajasthan site has the capability of processing soy, thus enabling the company to supply soy oil directly to the northern Indian market.  Moreover, the facility can also crush, refine and package rapeseed.

On the other hand, the Akola facility in Maharashtra is capable of crushing, refining and packaging soybean while facilitating Archer Daniels to produce vegetable oil and meal for food and animal feed markets. Further, the Akola site also owns palm oil refinery and warehouses for raw and processed materials.

Going with its expansion strategy, Archer Daniels has purchased the remaining stake in Tinna Oils, which includes a soybean and sunflower seed processing plant in Latur, Maharashtra, a soybean and sunseed processing plant in Dharwad, Karnataka and a Port warehouse in Vishakhapatnam, Andhra Pradesh. Additionally, earlier this year, the company has also acquired the soybean processing facilities of Madhur Agro in Nagpur, Maharashtra.

Further, to look after its operations and managing sales, purchase and administrative activities in India, the company has also established a headquarter office in Gurgaon, near New Delhi in the northern state of Haryana.

The recent acquisitions unfolds Archer Daniels' strategic move to expand its operational activities in the western part of India, particularly in Maharashtra. Maharashtra is one of largest oilseeds producing state in India, covering approximately 15% of the total oilseed production in the nation.

We believe diverse agro climatic conditions suitable for the cultivation of a wide range of crops, and a progressive farming community attracts Archer Daniels to expand its operations in that region.

Further, Maharashtra is one of the country's leaders in food processing having more than 16,500 small and medium and 322 large scale food processing units, which make the state a viable location for expanding operations. Moreover, the state has a huge urban population with high purchasing power. Maharashtra is a pioneer and leader in the use of water saving technology and is one of the major horticulture states in India, having more than 1.3 million hectare under different fruit crops. The State is the major exporter of Thompson seedless grapes, Alphonso mangoes, onions and long stem cut flowers.

Archer Daniels, which competes with Bunge Limited (BG) and Corn Products International Inc. (CPO), currently has a Zacks #5 Rank, implying a short-term 'Strong Sell' rating. Besides, the company retains a long-term 'Underperform' recommendation.