The Hindu Business Line : AVT Natural blooms on talk of US order

MARKET talk of AVT Natural Products Ltd bagging a huge order from a US-based company, has seen its stock price appreciate by almost 63 per cent from around Rs 44 levels (on the BSE) as on October 18 to its current level of around Rs 72 today. Between October 18 and 29, the counter had appreciated by around 23 per cent. Thereafter, the upsurge was much sharper.

AVT Natural Products Ltd, an AV Thomas Group company, is said to be a leader in the marigold business, with the largest marigold contract farming operation in southern and western India. Marigold is the primary raw material for the manufacture of lutein, a growing nutritional ingredient used in animal and human health products.

Industry sources said that the company has entered into a five-year strategic alliance with Kemin Industries Inc. Kemin is a US-based nutritional ingredient manufacturer and marketer of lutein. They are ingredient experts in animal feed, human dietary supplements and food products and pet foods. The deal is said to have been inked sometime around mid-October this year.

Despite repeated attempts, company officials remained unavailable for comment.

As per a Kemin Industries report on the alliance, India and AVT NPL will be the key strategic supplier of marigolds for Kemin. It also said that the two would work together to evaluate other pigments for the food and feed industries. Sources said that the two companies have been interacting on a supplier-customer platform since January 2000 when Kemin Industries had started purchasing raw materials from AVT to meet surges in market demand for lutein. The two companies had conducted business on a one-year contract basis negotiated at the beginning of each crop season.

Given the managements inaccessibility, there is no clarity with regard to what the alliance would mean in terms of revenue accretion to AVT NPL. However, commenting on the development that has been driving the stock price in the recent past, analysts maintain that it would bring stability into the company's earnings stream.

"Apart from topline and bottomline growth, the PE may also be re-rated. The stock could also see a re-rating on the bourses," a senior analyst with a leading domestic brokerage said. The stock ended at Rs 71.70, up 10 per cent, with around 10,077 shares traded on the BSE.