Analyst Meet / AGM - Analyst Meet
Aiming to reach directly to dealers and distributors
In interaction with Mr. Amit Kumat MD of the company on 9 April 2019
Key Highlights
Both FY 15 and FY 17 saw depressed margins due to high potato prices. Average margins for the company are around 8.5%.
Also the company is looking for more direct distribution and removing the super stockist mechanism of selling. the difference between Balaji and Prataap margins are of around 6% which is due to the stockist and super stockist presence in Prataap and not so in Balaji brand.
The company will gradually move towards direct distribution with distributors and dealers and then to retailers and will remove the stockist and super stockists.
Currently the company sales its products through 1.7 M outlets and 3500 distributors.
Rings account for around 33% of total sales. Ring had a very bad FY 19, and sales are down by around 20%. Hundreds of new competitors have emerged in this segment where toy is incorporated in packets of Rs 5 and getting sold. However things have now stabilised and Rings will grow steadily on this lower base. At one point in time Rings sales was around 40% of total sales.
Potato chips now account for around 33% of total sales and is growing strongly. Grew by around 15-16% in FY 19 and is expected to continue to grow strongly.
The Namkeen section including extruded snacks accounts for the rest. Huge scope exists in this segment.
The Avadh brand acquired in Nov 18 for Rs 148 crore. Avadh is 3rd largest packaged food brand in Gujarat and its sales for 6 months ended FY 19 stood at around Rs 78 crore with margin of around 6%. Huge scope exists in leveraging network, products, skus between Avadh and Prataap.
Company's products have high penetration in West and East India and have relatively low penetration in North and South India. It is increasing its reach by increasing its outsourcing model whereby instead of having own land and building and factory, it has a dedicated convertor to whom the company will give raw material and the convertor will invest and get his conversion charges for the finished goods that he produces.
Currently around 88% of total sales of the company are from in house manufacturing and rest are from such contract manufacturing where the company pays conversion charges.
The company has around 6.5% market share in overall snacks market in India both organised and unorganised put together.
Around 75% of company's sales come from general trade (Kiranawala).
The company has spent around Rs 50 crore and plans to set up more outsourcing manufacturing facilities. Further the company has expanded Avadh facilities wherein it can double the production. All these will get commercialized from May 19 onwards.
Further the company will commercialize the 3rd plant of cookie cake product which is a huge success. The 3rd plant has much higher capacity and will meet the growing demand.
So FY 20 there will be significant benefits of higher volumes, new products, better reach and availability, better leverage and sale of high margin products.
Overall margins can improve and aiming to reach to around 10% going forward.
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