IFB Agro Industries looking for expansion by way of capex light model during FY23

IFB Agro Industries Ltd is looking for expansion by way of capex light model during the current financial year. The company, which feels that the increase in the input prices and higher freight cost is likely to impact the margin during FY23, is looking to take all round efforts to ensure improved margins and better returns on capital employed.

The company operates in two segments - spirit, spirituous beverages and allied products and marine products.

Challenges

“The current financial year will be a year of challenges for both the domestic and export business. Increase in the input prices, higher freight cost is likely to impact the margin. Margin in distillery is also likely to be impacted due to increase in the prices of non-edible grain and fuel cost,” the company said in its latest annual report .

Growth in the aqua feed business is also likely to be affected due to the competition and restrictive credit being allowed by the company in the market. The company would focus on making direct sales to farmers from its aqua shops under cash and carry model. “During 2022-23, the company is focused on its resource allocation and is looking for expansion by way of capex light model,” it said.

In the financial year 2021-22, IFB Agro registered 34 per cent rise in gross revenue from operations on a standalone basis at ₹2,277 crore, as against ₹1,693 crore during the same period last year. Operational profit (EBITDA) increased to ₹92 crore in 2021-22 (as against ₹73 crore in 2020-21), an increase of 27 per cent.

The company is looking to focus on margin improvement plans across the verticals through better procurement of its key raw materials like broken rice, shrimps etc during the current fiscal.

The company’s capacity expansion plan for the distillery from 110 KL per day to 170 KL per day was completed in 2021-22.

Indian Made Indian Liquor (IMIL) business witnessed a decline in volume in the industry by around 15 per cent during last financial year as the MRP of products went up. The business continues to face issues and stiff competition due to excess capacity created by the new bottling plants in West Bengal.

IFB Agro had, in letters to stock exchanges earlier, intimated about excise-related issues being faced by and affecting the company. It is to be noted that the company’s board had, in April this year, approved contributions to political parties by way of subscription to the electoral bonds for an amount aggregating not more than ₹40 crore for FY-23.

Marine food business

The company’s marine exports registered a revenue growth of 144 per cent during last financial year due to better demand in export market as hotels, restaurants in the exporting countries started opening. The margins were impacted due to higher freight cost and reduction in export incentive by the Centrewith retrospective effect.

However, the company will focus to improve margins by strengthening its marketing by adding new supply destinations, reducing overhead and by increasing overall efficiency, it said.

Revenue from marine aqua feed business grew by 75 per cent during last year. The company continues with its restrictive credit policy adopted. It launched its own branded fish and prawn feed in the name of “Nutrisigma” and “Nutrafeed”. The company is focusing on direct sales to farmers through its retail aqua shop chain “Aquashop”.

“Marine domestic food business was impacted as demand from hotels and restaurant declined significantly. Company is focusing more on online and e-commerce sale to maintain its revenue and margins. The company continues to invest in this business in terms of product innovation, marketing and infrastructure,” it said.

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