LT Foods Ltd plans to set up a subsidiary in Africa for milling rice, as it gears up to service the continent’s growing local market.

“We are in active dialogue with a couple of players in Africa to set up a local milling capacity,” said S. Venkatesh, Head of International Trade at LT Foods Ltd.

The company plans to invest about $50 million in its African subsidiary over the next three years, he said.

“The subsidiary is most likely to be located in South Africa,” he added.

LT Foods plans to source the paddy locally and is also exploring options for contract farming with local farmers. The company’s move to get into local sourcing, milling and contract farming in Africa is part of its backward integration strategy, Venkatesh said.

Rising consumption

Africa has emerged as one of the largest markets for rice in recent years on rising consumption and accounts for a little over a fourth of the 35 million tonnes of rice traded globally.

This has attracted Indian exporters, who have shipped significant volumes of the cereal to the region since September 2011, when the Government, lifting a four-year ban, allowed exports of non-basmati rice.

LT Foods, which sells basmati under the Daawat brand, has expanded its operations in about nine African countries, including Zimbabwe, Ghana, Senegal, Ivory Coast and Burkina Faso.

In April-October this fiscal, the company exported about 2.5 lakh tonnes of non-basmati rice, of which about 1.6 lakh tonnes was shipped to Africa. Last year, the company exported about 1.35 lakh tonnes in the November-March period, mainly to Africa.

Export growth

LT Foods, which clocked a revenue of Rs 1,435 crore in 2011-12, is eyeing a turnover of Rs 2,000 crore this financial. For the quarter ended September 2012, the company posted a net profit of Rs 15.2 crore on revenues of Rs 434 crore.

Shares of LT Foods ended 3.5 per cent higher on the BSE on Thursday to close at Rs 63.20.

(This article was published on December 6, 2012)
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