The Hindu Business Line : VKS Exports expanding footprint, product offering

Coimbatore, Nov. 25 A Coimbatore-based multi-food products company, which is a major player in exporting eggs and buffalo meat, is on course to expanding product profile and retail footprint.

VKS Exports Pvt Ltd, which had a turnover of about Rs 220 crore during 2007-08, expects the turnover to go up to Rs 1,000 crore by 2012. It is also in talks with private equity investors to offload 20 per cent stake for about Rs 75 crore as a prelude to going public by 2011-12.

Speaking to Business Line, Mr A. Shivakumar, Managing Director, VKS Exports, a first generation entrepreneur (who said he strayed into this business after browsing the Internet for business opportunities), said his company has grown in six years as the largest exporter of fresh eggs from India, commanding a 75 per cent market share. The market size is estimated to be around Rs 250 crore a year. His company’s share of the eggs export is valued around Rs 160 crore. But for the bird flu scare a few years ago, the export market for fresh eggs was growing 30 to 40 per cent annually.

He said it was in the wake of the bird flu controversy in 2006, when the Middle East market contracted, that his company began exploring other markets. Afghanistan emerged as a key market for eggs and its market size is estimated to be about Rs 75 crore a year. The extreme climate changes in Afghanistan are a challenge but if cold storage facilities are established there, the market for Indian eggs would witness an exponential growth.

Mr Shivakumar said during 2007-08, his company had a turnover of Rs 220 crore of which Rs 160 crore came from the export of eggs, Rs 40 crore to Rs 45 crore was accounted for by export of buffalo meat, Rs 12 crore from chicken sales and about Rs 7 crore from sale of salt.

During the current fiscal, he expected the total turnover to touch Rs 320 crore of which export of eggs would be about Rs 200 crore, buffalo meat exports would be about Rs 70 crore, chicken sales would be about Rs 20 crore and salt sales would be about Rs 12 crore.

He said his company is now adding pork to the portfolio. A small unit has been established at Navakkarai near Coimbatore and the company was doing it on a trial basis.

As in the case of poultry, the company would follow the same integration model for pork also, if the experiment clicked. The company was outsourcing supply of buffalo meat for which it has three plants in Uttar Pradesh.

Asked about the business strategy of the group and whether it would continue to outsource all products for exports, he said the group started work on backward integration a year ago on establishing its own hatchery and feed mill for chicks. The company would be producing 3 lakh birds every week, of which 2.2 lakh would go to its processing plant and about 80,000 birds would go to its own retail chain under the Farm Fresh Chicken brand.

Mr S. Ashwin Subramanian, Executive Director, VKS Farms Pvt Ltd, said the company has 12 retail outlets under the Farm Fresh Chicken brand, which would be expanded to 100 outlets by the end of 2009.

The focus would be on Tamil Nadu, and apart from Coimbatore, the towns where the outlets would come up include Madurai, Dindigul, Salem and Chennai. He said because of customer’s preferences, these outlets would have live and processed chicken. The outlets would be fully owned by the company and after watching the growth, the company might consider taking the franchise route. Each outlet would involve an investment of Rs 3 lakh. An additional salt refining unit was coming up at an investment of Rs 3 crore near Thoothukudi.

Mr Shivakumar said the company’s core focus would be on poultry and it would continue to outsource buffalo meat supply. The pork plant was being established on a pilot basis with a capacity of 150 tonnes a month. His poultry model was to have a capacity of 3 lakh birds, of which 80 per cent would go for processing and the balance to retail sales. Out of the processing share, 75 per cent would be exported and the rest would be sold in the domestic market.

He said operating the 100 retail shops and the processing plant successfully would generate far larger income than live poultry wholesale business. Once this model proved itself a success, after 2009 he would repeat this model in other States.

Another plant was being planned at Anantapur in Andhra Pradesh. His aim is to make VKS Exports a Rs 1,000-crore company by 2012. Mr Shivakumar said there was a huge market for these food products in areas other than metros, which he wanted to capture. The per capita consumption of these food products also was higher in rural and semi-urban areas compared to urban and metro centres.

Mr Ashwin said apart from the Anantapur plant, the group was looking in the western region to serve the Maharashtra-Gujarat markets for poultry products. The idea was to have easy access to ports so that the export market could be served easily.

Mr Shivakumar said several private equity players were negotiating for investing in his company and he expected total valuation of about Rs 75 crore for a 20 per cent stake sale, which could happen in six months. With a view to provide them an exit route later and unlock its value, the company would come out with a public issue, which might come in 2011-12.

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