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Sunday, Jun 23, 2002

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Venky's India: Good egg

Sowmya Krishnan

VENKY'S India offers cumulative and non-cumulative deposit schemes. The cumulative scheme offers 9 per cent for one year and 9.5 per cent for three years. The minimum deposit amount is Rs 5,000. Under the non-cumulative scheme, it accepts deposits only for three years. The interest rate is 9.5 per cent paid at half-yearly intervals. The minimum deposit amount is Rs 10,000.

Recommendation: The cumulative option appears more convenient as it offers more flexibility in terms of tenures and the minimum deposit requirement. Investors can consider the one-year cumulative option. The interest rates are attractive at the shorter end, but might be inadequate for the three-year tenure. Hence, the three-year option can be avoided.

Business profile: Venky's India is the flagship company of the Venkateshwara Hatcheries group. The business includes poultry breeding, procuring eggs and broiler chicks. It also processes, markets and sells, ready-to-cook chicken, fast food, items of poultry meal and other ingredients. Recently, it forayed into production of egg powder, which has a good export market.

Venky's India is one of the leading organised players in the poultry farming business. It has exhibited decent growth rates in the last five years. After a dip in sales and profits in 2000, it rebounded in 2001 to register 8 per cent growth at Rs 225.63 crore. Its performance improved further for the nine months ended December 2001. For this period, the turnover rose 23.5 per cent to Rs 192.83 crore while net profit grew 83 per cent to Rs 7.66 crore. Substantial decrease in interest costs (down 18 per cent to Rs 3.68 crore) improved margins.

The debt-equity ratio, another important indicator of the financial risks borne by the company, is comfortable at 0.58 times.

The interest coverage improved substantially from 0.93 times to just over two times for the nine month period ended December 2001, compared to the corresponding previous period.

The cash flow position too appears comfortable. It has been declaring dividend at 40 per cent for the last three years, the pay-out ratio hovering around 25 per cent.

Considering the strong fundamentals, financials and the attractive returns, one can opt for the one-year cumulative scheme.

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