IFB Agro expects FY22 to be a year of challenges

Kolkata-based liquor and processed food company, IFB Agro Industries, is expecting FY22 to be “a year of challenges for both the domestic and export business”.

Heightened competition in the alco-beverage segment – the prime revenue generating vertical – along with Covid-induced demand shortfalls and sourcing issues due to cyclones affecting shrimp production are seen as causes for the toned down business outlook.

The alco-beverage segment, which accounts for over 80 per cent of the company’s revenues, was the only vertical which reported profits in FY21. Sales were impacted during Q1 of FY21 as its distillery could operate only on 11 days with 50 per cent capacity. Cyclone and local disturbances impacted subsequent operations of the distillery.

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Capacity expansion plans for the Indian Made Indian Liquor (IMIL) distillery – to 170 kilo litre per day from 110 kilo litre per day – were impacted by the second wave with restrictions on the usage of industrial oxygen at its plants.

“The business continues to face stiff competition due to excess capacity created by the new bottling plants in West Bengal,” the company said in its annual report.

Tiff with local authorities

Apart from the Covid-induced impact, IFB Agro said “excise authorities created hindrances to the business” with steps like “closure of Dankuni plant (in West Bengal) on alleged quality issues, which ultimately turned to be baseless”.

Closure of all tie-up units for 25 days in November 2020 and non re-registration of its flagship IMIL brand ‘Captain’ for almost a month in November and subsequently “putting restrictions on retailers in the various districts, on lifting IFB’s products” also hit the vertical.

Apart from segment revenues declining by 11 per cent YoY, IFB Agro also lost market share. It has entered into some tie-up operations with other bottling plants having spare capacities to produce its liquor brands “on contract basis”.

For the quarter-ending June 30, 2021, the company reported a consolidated revenue of ₹528 crore with a net profit of ₹17 crore. Spirits continue to drive both the top-line and bottom-line, while the marine products vertical was back-in-black reporting ₹4 crore profit before tax for Q1FY22.

Marine Products

The marine products vertical saw procurements hit by cyclones in east India including West Bengal. Demand across domestic and export markets are likely to remain muted with restricted availability.

“The Yaas Cyclone has damaged shrimp crops in West Bengal and this will lead to lower availability for processing and export. The export market during the year will be tough due to restrictions in hotels and restaurants in many countries,” IFB Agro mentioned in its business outlook part. For FY21, marine exports registered a revenue drop of 53 per cent, YoY.

As a de-risking initiative, IFB-Agro is ramping up its online and e-commerce presence while “strengthening of trading operations in the international market is being explored”.

In the aqua-feed (fish food) business, growth will be hit because of “restrictive credit” being allowed by IFB Agro to its front-end. The attempt is for direct sale to farmers from ‘Aquashops’ and pushing a “cash and carry model”.

IFB Agro has also launched its own branded fish & prawn feed in the name of ‘Nutrisigma’ and ‘Nutrafeed’ on pilot project basis.

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