Orkla India: The spice of the matter

Shares of multi-category food maker Orkla India, owner of the MTR and Eastern brands, have fallen 25 per cent since its November 6, 2025, listing—largely in step with the 22 per cent drop in the Nifty FMCG (TRI) index and peer Tata Consumer Products’ (TCP) 20 per cent slide in the same period.

Following this broader FMCG de-rating, Orkla trades at 25x trailing earnings (₹537 levels), down from its IPO valuation of about 39x FY25 earnings and at a sharp discount to TCP’s current 58x P/E. Even at the time of the IPO, Orkla India’s valuation discount was over 50 per cent to TCP.

While Q1FY27 double-digit revenue growth and digital traction improve the outlook, muted 1.7 per cent volume growth, severe spice inflation and an ongoing distribution overhaul in Kerala suggest earnings recovery still needs confirmation. For long-term investors, however, the risk-reward is tilting favourably. Further price weakness would improve the valuation cushion.

The MTR brand was established in 1924. In 2007, as part of an internal reorganisation undertaken before the acquisition by Orkla ASA, MTR Foods (now Orkla India) formally acquired the exclusive rights to the MTR brand for use in processed and packaged foods and beverages. These rights are held in perpetuity by Orkla India for packaged-food operations.

The Eastern brand, founded in 1983 in Kerala, built leadership in spices and regional convenience foods. Orkla India acquired Eastern Condiments in March 2021, blending MTR’s Karnataka dominance with Eastern’s Kerala and export strength.

MTR and Eastern give Orkla a strong regional base. Rather than rely on one national taste profile, the company builds products around regional cuisines. Its FY26 revenue mix reflects that focus. South India contributed 70 per cent of revenue, while international markets accounted for 21 per cent and Rest of India 9 per cent. MTR and Eastern also serve different culinary preferences, giving the company room to broaden its portfolio without relying solely on one brand.

The categories are developing at different speeds. Spices remain the larger business, at 65 per cent of FY26 revenue, while ready-to-eat and ready-to-cook convenience foods (including breakfast, meals, sweets) contributed 35 per cent. In FY26, convenience-food revenue rose 11.3 per cent, faster than spices, which grew 2.9 per cent. In Q1FY27, both categories grew at over 11 per cent. Meals led the convenience-food performance, with the management citing double-digit growth in that portfolio.

The channel mix offers another avenue for expansion. Recent quarterly numbers illustrate this shift. In domestic market, digital commerce grew 38.1 per cent in Q1 FY27 and contributed 8.9 per cent of domestic revenue, up from 7.2 per cent a year earlier. This indicates a good growth runway.

Modern trade (organised retail chains and supermarkets) grew 18.6 per cent. The management says the digital channel has a favourable product mix, led by convenience foods and blended spices. Orkla is also extending breakfast products, including dry batter into more metros, wet batter into Hyderabad and a protein-led range for younger consumers.

International sales add diversification. The business grew at a resilient 10.1 per cent in Q1FY27, with Gulf Cooperation Council (GCC) revenue up 18.1 per cent. The company says it maintained availability despite West Asia-related freight and supply-chain disruption. A reformulated non-dairy MTR Minute Meals range is being prepared for the UK and European markets, though this is groundwork for a potential new business stream, not yet evidence of sales.

The balance sheet gives Orkla room to fund these efforts. It reported a nearly ₹600-crore cash surplus as of March 2026. It is a virtually debt-free company.

The key question is whether sales growth can become more volume-led. Product sales rose 11.5 per cent in Q1FY27, but consolidated tonnage grew only 1.7 per cent against 8.5 per cent in Q1FY26. The management put price-led growth at 11.4 per cent, up from 6.5 per cent in Q4FY26.