Orkla India Limited has received a significant GST demand order from the Kerala State Tax Department, highlighting regulatory challenges in goods classification for food manufacturers. The company disclosed this development through a regulatory filing under SEBI listing obligations.

GST Demand Details

The Divisional Deputy Commissioner of State Tax, Taxpayer Services Division, State Goods and Services Tax Department, Idukki, Adimali, Kerala, has imposed a comprehensive demand on the company. The order was issued under Section 74 of the CGST Act 2017, targeting alleged violations spanning multiple financial years.

Nature of Alleged Violation

The GST demand stems from alleged misclassification of goods, specifically relating to ready-to-cook products. The violation period extends from FY2018-19 through FY2023-24, covering six financial years of operations. This misclassification issue originally pertained to Eastern Condiments Private Limited, which subsequently merged into Orkla India Limited through an NCLT order dated August 24, 2023.

Timeline and Receipt

The tax authority issued the demand order on December 24, 2025, and Orkla India received it on January 06, 2026, at approximately 11:21 AM IST. The company promptly disclosed this information to stock exchanges on the same day, demonstrating compliance with regulatory disclosure requirements.

Company's Response Strategy

Orkla India has indicated its intention to contest the GST demand through appropriate legal channels. The company's management, along with its legal advisors, believes that their position regarding the goods classification will likely be upheld in the forums where the matter will be contested. The company expects to challenge the demand without anticipating any material financial impact on its operations.

Regulatory Compliance

The disclosure was made under Regulation 30 of SEBI Listing Obligations and Disclosure Requirements Regulations 2015, following the prescribed format for reporting such regulatory actions. This transparency ensures that investors and stakeholders remain informed about potential financial obligations and legal challenges facing the company.

Orkla has received a Buy rating from analysts with a target price of ₹800, representing significant upside potential from the current market price of ₹612.00. The recommendation is based on the company's strong market position in regional markets and robust growth prospects across both domestic and international segments.

Strong Regional Market Position

Orkla maintains a dominant market share in its core states of Karnataka, Kerala, Andhra Pradesh, and Telangana, leveraging its well-established legacy brands MTR and Eastern. The company's deep understanding of regional tastes provides a strong competitive advantage and creates a sustainable moat in these markets. This regional expertise positions the company well for continued market leadership in the spices and convenience foods segments.

Growth Projections and Financial Outlook

Analysts expect the company to deliver steady domestic growth driven by increasing household penetration in core markets and expansion of its product portfolio. The financial projections present a compelling growth story:

Export Business as Growth Driver

The export segment represents a key growth lever for Orkla, currently contributing 21% of total revenue. The company holds a significant 22% share in branded spice exports and is well-positioned to benefit from rising demand from the global Indian diaspora.

Margin Expansion and Operational Efficiency

The company is expected to achieve margin expansion and improved cash flow generation through operational efficiencies and a better product mix. Analysts project EBITDA margin improvement of 100 basis points over FY25-28E, reaching 17.60% EBITDA margin in FY28E. This improvement is anticipated to drive meaningful enhancement in underlying Return on Capital Employed (ROCE).

Investment Rationale and Risk Factors

The DCF-based target price of ₹800.00 reflects the company's potential for selective acquisitions and continued focus on execution excellence. However, analysts have identified key risks including commodity price volatility and competition from unorganised players in the market.

The initiation of coverage with a Buy rating underscores confidence in Orkla's ability to leverage its regional strengths, expand its market presence, and deliver consistent financial performance across both domestic and international markets.

Analysts expect Orkla to achieve a revenue CAGR of 9.00% over FY25-28E, citing the company's strong regional market position and export growth potential as key drivers for this projected growth.