Godrej Agrovet Limited (GODREJAGRO) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Godrej Agrovet Limited Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Devrishi Singh from CDR India. Thank you, and over to you, sir.

Thank you. Good afternoon, everyone. I welcome you all to the Godrej Agrovet Q4 and FY '21 Earnings Conference Call. From the company, we have with us Mr. Nadir Godrej, Chairman of the Company; Mr. Balram S. Yadav, Managing Director; and Mr. S. Varadaraj, Chief Financial Officer of the company. We would like to begin the call with brief opening remarks from the management, following which we will have the forum open for an interactive question-and-answer session. Before we start, I would like to point out that some statements made in today's call may be forward-looking, and a disclaimer to this effect has been included in the earnings presentation shared with you earlier. I would now like to invite Mr. Nadir Godrej to make his initial remarks.

Good afternoon, everyone. I welcome you all to Godrej Agrovet's earning conference call. We are currently facing very challenging times, and I hope that you and your families are safe in healthy. The financial year 2021 was one of the most difficult and unprecedented years for Indian economy.

Mr. Godrej. So sorry to interrupt. We experienced a breakage in your voice, if you can.

The financial year 2021 was one of the most difficult and unprecedented years for the Indian economy. Both demand and supply were disrupted across sectors, except for the agricultural sector. This is the only sector that is expected to grow in the financial year 2021. At Godrej Agrovet we quickly adapted to the changing situation and focused on improving our profitability. Thanks to our diversified business portfolio, we were able to significantly improve our profits despite the volume and sales decline seen in 2 of our businesses, Animal Feed and Dairy. These businesses were impacted by lower demand from the HoReCa segment. The second wave of COVID-19 which hit India in March '21 is more severe and is causing a high degree of turmoil and uncertainty. Localized lockdowns by states could again lead to economic disruptions and can delay the economic recovery expected by economists in fiscal year 2022. At Godrej Agrovet, currently, all our plants are operational, while maintaining the utmost safety of our employees. We also have an active vaccination program, though availability of vaccines is indeed an issue. We're also ensuring adequate raw material stocks to avert production disruptions, which could be caused by supply chain or logistical issues. We believe that we will be able to tide through the near-term challenges smoothly. In terms of the financial and operational performance, the key highlights and developments for the fourth quarter and the full year 2021 are as follows: We had another quarter of excellent performance. The consolidated profit before tax in quarter 4 fiscal year '21 increased to INR 79 crore, representing lower than 3x growth over the same period last year. This was despite a marginal 2% decline in the consolidated total income. For the fiscal year 2021 also, our profit before tax grew at a robust rate of 60% despite an 8% decline in the total income. Please note that the above numbers, excluding the real estate income and other nonrecurring exceptional items. We have provided these details in our earnings presentation for the quarter. Now I will discuss the key financial and business highlights for each of our segments. In Animal Feed, our segment results grew by 71% in the quarter and 24% in fiscal year '21, supported by favorable commodity prices and realization of R&D benefits. However, volumes and revenues were impacted by lower demand. Though institutional demand for the end protein product, that is milk, chicken and eggs, increased sequentially, it was still much lower than the pre-COVID levels. This resulted in volumes being flat year-on-year in quarter 4 fiscal year '21, despite a low base. For the full year, volumes declined by 13%. Raw volumes and soft commodity prices resulted in a 9% and 17% decline in segment revenues in quarter 4 fiscal year '21 and the entire fiscal year '21. In the Vegetable Oil segment, revenues and results grew by 8% and 23%, respectively in quarter 4, driven by high oil prices. However, for the full year, business was impacted by the white fly infestation, which lowered the fresh fruit bunches arrival and the oil content in the fruit. As a result, segment results for fiscal year '21 declined by 6% year-on-year. However, segment revenues grew by 5% in fiscal year '21, benefiting from the increase in crude palm oil prices and crude palm kernel oil prices. The stand-alone Crop Protection business had a very good quarter, with segment revenues growing by 40% and segment profitability more than doubling, higher sales of in-house products, which have relatively better margins were the key growth contributors in quarter 4 fiscal year '21. Our focus on increasing collections yielded results and collections grew by 27% to 629 crore in fiscal year '21. But supply chain disruptions and low application opportunities in the first half of the year resulting in sales and profitability for the full year being similar to the previous year. Moving to the performance of our subsidiaries. In Astec Lifesciences Limited, the fourth quarter performance was impacted by lower export sales and a high base. For the full year, revenues grew at 6% mainly driven by the domestic market. Segment-wise, growth is supported by the enterprise sales segment. Our profitability significantly increased in fiscal year '21 and profit before tax grew by 45%. Strategic raw material stocking and overall cost control helped increase profits in the year. For our poultry subsidiary, Godrej Tyson Foods Limited, it was one of the best years. Revenues grew by 17% and the company reported an EBITDA of 42 crore in fiscal year '21 compared to an EBITDA loss of 48 crore in fiscal year '20. Higher volumes and prices, along with favorable input prices, led to strong performance in quarter 4 fiscal year '21. Yummiez continued with strong growth with the Live Bird segment profitability was impacted by the bird flu outbreak in January. In our Dairy subsidiary, Creamline Dairy Products Limited, sales were impacted by low out-of-home consumption and subdued demand from the HoReCa segment. However, the impact in the current quarter was lower than the impact seen in the previous quarters. In quarter 4 fiscal year '21, revenues were flat year-on-year, and EBITDA improved marginally. For the full year, while revenues have declined by 13%, EBITDA increased by 20% on account of low procurement prices and a focus on fixed cost control. GAVL's joint venture, Bangladesh, ACI, Godrej Agrovet Limited, recorded strong revenue growth of 22% and PBT growth of 44% in fiscal year '21. The growth was driven by strong volumes across all these categories. Profitability also benefited from low raw material prices. Our balance sheet is strong with a debt equity ratio of 0.38. Return ratios also improved with ROCE increasing to 14.1% in fiscal year '21, compared to 11.7% in the previous year. With this, I conclude our business and financial performance update for the quarter and the year. We will now be happy to take your questions. Thank you.

[Operator Instructions] The first question is from the line of Prakash Kapadia from Anived Portfolio Managers.

I had 2 questions. Sir, if I look at the second wave of COVID, it is far more spread in total India. And even today, there are 15, 16 states, which are under lockdown. So, sir, what is the outlook for demand in the near term? Which segments do you think there could be demand issues if this continues? And secondly, if I look at cash flow from operations, that has declined from f around INR 335 crores to 110 crores, and similarly, the debt has also increased. So which segment are we facing any inventory or later issues and what are we trying to improve this working capital cycle and the cash flow from operations?

I'll answer this question, and Mr. Varadaraj will answer the second question. So definitely, the second way is very devastating. But I must tell you that the way the economic activity came to a grinding halt in the first wave -- I think that economic activities continues, however, there are more number of cases and more casualties, but the business is running. So that is one side of the narrative about COVID second wave. The second thing I must tell you that animal protein consumption has gone down significantly. It had not recovered fully post the COVID first wave as well as bird flu. But again, due to lockdowns, localized lockdowns, out-of-home consumption has tanked, chicken prices have come down significantly about the fortnight ago, now they have started improving. And of course, milk consumption is down and milk procurement prices are also tanking ex farm. So my sense is that animal protein consumption will go down. I must also tell you that if you remember my February conference meeting, I was saying that this -- if there is no COVID second wave, there will be a shortage of animal protein and food inflation will be driven by animal protein prices, which it did also in March. If you see chicken prices were at the highest, egg prices were at the highest, and milk procurement and sales prices were at the highest. So my sense, as far as animal protein industry is concerned, is as follows: the production reduction is happening at a very rapid pace because the industry cannot take so many shocks. However, once this wave subsides in 2, 3, 4 weeks' time, consumption is coming back in states where the COVID impact is reducing consumption and is coming back, and we can see a steady rise in chicken and egg prices. There is going to be a huge shortage of animal protein in next 3 to 5 months' time in case the COVID subsides in next 3, 4, 5 weeks. So my sense is that people who are in the game will be benefited. The profitability will go up significantly because there are so many, so many small, small companies and farmers who are exiting the business.

While you mentioned about the animal protein side, any other specific you have on some of the other sectors?

Mr. Kapadia, sorry to interrupt. Maybe request you to move to a better reception area, please. Your voice is breaking up.

Fine. I was saying, Balram, you mentioned about the Animal Feed and Protein segment, could give some color on the other segments, what is happening currently? Obviously, all of us are hoping this will be a temporary drive and things will improve in the next few weeks.

Yes.

That remains the core assumption. And on palm oil side, other segment side, if you would give some color.

Let me start with pesticides. I think I must tell you that the season for pesticide sprays will only start in the first week. Application will only start from the first and second week of June. Today's the placement time. I must also acknowledge that due to Mondays being closed at certain places, placement is not easy. But we are hopeful that in a week or 2, the situation will improve when and Mondays will open and placement of pesticide will start. So we are expecting a good monsoon. That means a good ferry season. And as you know, almost 65% to 70% of our Crop Protection business is ferry-focused. So in case monsoon is good, we will be home as far as raise is concerned. Regarding palm oil, what is happening to global prices, we have never seen such high prices ever. Today, palm oil is ex our factory, about INR 123 a kilo, which is 2x of what it was about 13, 14 months ago. So this is the kind of inflation which has happened. We believe that the consumption of oil, even though it has not increased substantially, the prices will remain because a lot of food and oil seed is being directed world over to biodiesel. So my sense is that as far as edible oil is concerned, inflationary conditions will continue, even though the consumption remains at the earlier levels of FY '21. And probably all the other businesses I've already talked about as far as animal protein is concerned.

This is S. Varadaraj, and I'd like to answer to the second question on the capital employed and the cash generation. So in the fiscal year '21, what we witnessed was that the short-term commercial papers, as a borrowing group was very, very competitive. And so we shifted to that mode of financing vis-à-vis supplier financing. And consequently, if you were to look at our capital employed or cash flow, on the face of the annual report or balance sheet, it looks to have sort of gone up. So I just share the numbers, which, if you were to exclude the acceptances from this entire thing, how does it look? So in March 20 the reported capital employed was INR 2,850 crores. And if I were to add acceptances, the capital employed, without considering acceptances was INR 3,731 crores. This -- when I compare it with March '21, this number is INR 3,716.8 crores. So capital employed has more or less remained flat, if I were to really say, between March '20 and March '21, but for the drop in acceptances. Similarly, cash flow, as -- no, we see, if I were to look at the cash generated from business operations, net of dividends, it was a negative INR 357.7 crores. But if I exclude the impact of change in acceptances, which is around INR 613 crores, a net positive cash flow generated by business operations, net of dividend paid out was around INR 256 crores. We have inserted a slide to this effect in our investor presentation as well, which is uploaded. So both capital employed have remained flat. Cash flow has been a positive due INR 255 crores.

One more addition from point of view of business, our borrowing costs, short-term borrowing cost is very low. The prices of raw materials are very volatile, and there is inflationary pressure. This is the time to invest money in taking raw material positions, and we will go for maximizing profit in all our businesses.

And lastly, Balram, what you've seen post the IPO over the last 3, 3.5 years? Few quarters, sales comes; few quarters, margins come. So when do we see sales and margin coming more on a predictable basis? Because we have all the right ingredients, some of the R&D initiatives seem to be working as of now and inflation is where it is. So when do we see a more consistent trajectory in terms of sales and profitability, both coming from the company as a whole?

So Prakash, yes, you're absolutely right. I think in some ways, a lot of correction was made in FY '19 and FY '20. And if you see some of our cost numbers, et cetera, we have been able to make substantial reductions in our overheads, et cetera, so capacity utilizations were also very low. So you would have seen whatever we had done in FY '19 and FY '20 yielding results. But for so much of disturbance and noise being created by COVID, my sense is that we have used the last 4 quarters to make our businesses more efficient. Our slogan was that we will manage the business during these last 4, 5 quarters of COVID for cash and costs. And I think we have been extremely successful in doing that. It is just a matter of time that we will start showing more consistency and sustainability of our top line and bottom line.

Next question is from the line of Ankur Periwal from Axis Capital.

And now first question on the palm oil side. As you rightly mentioned, there has been a significant causing price inflation there. Any early sense on how the crop is expected to be as well as on the pricing front? Any thoughts there?

Sorry, I didn't get your question, please, can -- you're asking the crop condition?

On the oil -- palm oil plantation side.

So plant oil plantation last year, one thing is there, last year, everybody knows that Indian palm oil plantations were affected by white fly, particularly Andhra Pradesh. So it was not that, that we don't know how to control white fly. There are chemical controls and biological controls. But the most important period for white fly control is sprays from mid-March to April end, which was totally missed because of the lockdown last year. This year, we were very proactive from 1st of March. Our farmers, with the help of government and the entire industry, has been doing it at a community level, both chemical space as well as biological treatment. And we are very, very glad to know that as compared to last year, the white fly infestation is not even 10%. So we believe that we will be back to more than FY '20 levels of fruit production and the steady state of growth, which we were having about 8%, 9% will be restored, not over FY '21, but on FY '20. On FY '21, we might grow significantly, but that is on a lower base.

Sure, sir. And this inflation in the pricing side, will that also mean that the profitability will be significantly better?

Profitability will be better, but you must always remember that it is a formula. So almost 79%, 80% of the oil price goes to the farmer as the fruit price. But definitely, absolute profits will be much better, much better than last.

The [ consumption ] is proportional to the price and the fixed expenses are not proportional to the price. So we benefit significantly from higher prices.

These things which we are banking on this time is some technological improvements which we made last year, which should improve oil extraction ratio. If this happens, which is the promise, we believe that margin will be better because of that also.

Sure, sir. Sir, second question on the Crop Protection side. Now last year, if I go back to your comments mentioning that we'll be focused on cash, cash collections and reducing the receivables there in the system, what are your thoughts going ahead? Are we seeing this year as a growth? Or any early thoughts there?

I'm saying that we had -- we because of COVID, our most important factory was Jammu factory last year, which was closed for almost a month. So I would say that loss of sale was about INR 40 crores, INR 50 crores, and that would have been seen as growth last year. So fortunately, nothing -- no disruption to date that you would have happened in any of our factories, whether it is Maharashtra, Gujarat or Jammu. So we believe that if the monsoon is even average, we will be registering very good growth in this business. However, working on hygiene, which is inventory management, returns as well as outstanding will be state of priority. This is a business which probably now has to focus on both growth and hygiene simultaneously so that we don't lose money unnecessarily to bad debt.

Fair point. Sir, and lastly, on the Animal Feed side, now given the second year is still going on, do you expect -- what are your thoughts on the volume side as well as the margins? We have seen a pretty impressive improvement in this year, whether there are still some mix to grow there? And just 1 clarification, the capital employed in this business, there is a sharp jump, if I look at the numbers. Is this the inventory procurement, which you are alluding to in the year coming?

No, no, no, so first and foremost, the market has shrunk, whether it is milk, whether it is chicken, whether it is eggs. So that is why you see lower volumes, but higher profitability. The higher profitability came because of significant improvement in feed cost because of RM benefit -- sorry, R&D benefit. And then there was a time for about 2, 3 months when post COVID, the commodity prices came down significantly. So my sense is -- and which I think you must have seen in our Q4 numbers, the story continues that this year will be the year of increasing market share in all our animal feed segment. This sector has been very badly affected. A lot of players have been badly affected, and we are getting a lot of traction for our feed sales at improved margins. The margins are also a function of the kind of raw material positions we have taken in last 2, 3 months, which are paying off very well and the continuation of R&D benefits. So I have a feeling that there will be significant improvement in our market share in all segments in feed. And even though we did not grow in cattle and poultry last year, we still showed marginal improvements in shrimp and aqua feed. And I believe all segments will grow the way we are seeing for last few months. That's point number one. Point number two is, I think in simple terms, I will tell you that we used to do -- take acceptances, which is bill discounting. And that was a costly loan we will take, which would be at a certain bill discounting price. What happened last year is that earlier, the bill discounting price and short-term borrowing rate was -- spread was less than 1%. It expanded to 2.5%. So we immediately stopped bill discounting and started buying on cash by taking these short-term loans because it was much cheaper and the cash discounts in markets were very good. So this was also one of the reasons why towards the second half of last year, our margin profile in Animal Feed improved. So actually, if you really ask me, it is not increase in capital, because what we were doing, we were borrowing something short term, and most of the money we were taking in acceptances with the supplier and bill discounting. Now the supplier bill discounting is reduced because it makes a lot of business sense. Why do supplier bill discounting at 5.5% if we can borrow 90-day money at 3.5%? Please be sure that as far as animal feed is concerned, not a single -- this is a business which is a high ROCE business. We will keep an eye on that. And it has negligible bad debts, et cetera. But I don't think this is the year we can really maximize profits and take it to a certain level. Just to add to what you said, because that question will come, my view is that you don't judge us by Q4. Because that was a little -- I think we got some huge benefits of RM, but a steady state EBIT margin in our animal and -- in our poultry and cattle feed will be some -- between 6% to 7% EBIT. And in aqua, it can be between 8% to 9%, steady state but at very high ROCE.

Next question is from the line of Sumant Kumar from Motilal Aswal Financial Services.

So my first question for Animal Feed segment. Sir, can you talk about the current scenario? Because we have seen a -- the second wave of COVID and lockdown is going on, so how the demand is going to be. And previous year, the demand impacted significantly. Compared to that, how the demand is going currently and the outlook for that.

So I would say that in April, April '21, we were almost 90% of January '20 levels as far as all animal protein production was concerned. So we were coming back big time. Even during the bird flu also, I must say that the production of poultry was not reduced significantly, even though prices have become unremunerative. But going back, what is happening now and the way prices have tanked, my sense is that we -- over April, May, June, July, will be about 75% to 80% of April month's volumes. And once the lockdowns go, consumption starts, you will see unprecedented prices of corn -- or sorry, of chicken and eggs particularly, and fish will follow immediately thereafter. So my sense is that the market has shrunk, but the production has shrunk even more. And we will see in case COVID -- I qualify everything that in case this wave subsides in 3, 4 weeks' time, we will see unprecedented prices of animal protein. That is point number one. Point number two is as I already told you, that the industry has suffered. So big players, unfortunately, tend to benefit in these situations. And that is why I'm saying that we will improve our market share in all segments this year.

Overall, currently, the demand is 90% of January, but Y-o-Y, it should be higher, right?

Y-o-Y is higher? Yes, yes, yes.

Okay, so overall, we can say that FY '21, animal food segment, we are going to do well.

It is a safe assumption to make.

And talking, overall, raw material prices in the Animal Feed segment is going up, corn price higher, so revenues are also higher. So, can you talk about the margin pressure in animal feed segment? How are we taking the price increase in the in the product?

So there full pass through, so that is definitely there. But I think in the first half of the year, we will be -- first half of the current financial year, we will be benefited by a very good raw material position we have taken. But there is a full pass-through and the pricing is done on replacement prices.

So Y-o-Y margin pressure will not be there in FY '21?

I beg your pardon?

Compared to FY '21, FY '22 will have a similar kind of margin or margin? We will have a margin, too?

I think if you really want to compare FY '22 margin, there will be closer to the quarter 4 margins of Animal Feed.

And talking about palm oil, we have seen a significant surge in the palm oil prices, Y-o-Y, 77% jump. So can you talk about how sustainable this price is? And what are the key reason for the price -- high price rise globally and any other -- say, can you give the outlook of the palm oil prices globally and...

And Mr. Godrej, would you like to take this question, sir?

Yes, because of President Biden's focus on fighting climate change, there's been a huge demand for biofuels. And biofuels are mostly biodiesel and bioethanol. Bioethanol is made from corn and sugarcane. So prices of corn, sugarcane and oil seeds, because biodiesel is made from vegetable oils, have all gone up and are likely to stay high for quite some time.

So this price is going to sustain at this level, Okay. So this price is going to sustain at this level, going by whatever the biofuel demand is higher? And so this price is going to sustain for a couple of years?

Very likely because it's very difficult to grow more crops because almost everything is going into biofuels. So what do you substitute? How -- what do you not grow? If you can get more land, then the farmers with these very high prices would be enthused to produce more. But there's a limit to how much more they can produce. On the other hand, the prices would come down if biofuel mandates are reduced. But as of now, it doesn't look very likely because the whole world is focusing on fighting climate change.

Okay, any crop damage of the palm oil-producing country?

No. They -- palm oil production cannot be raised very fast because it takes 5 years for a palm tree to grow. At best, you can use a little bit more fertilizer, et cetera, when prices are high. And when prices are low, they use less fertilizer, but that is a small effect. Whereas annual crops like soybeans, rapeseeds, sunflower, the farmers can plant more. But they would have to do that at the expense of [ weaker ] corn. But those prices have also gone up.

What I was reading from there, there was a -- because of lockdown, there was a labor issue. And because of that, we have a production impact, and that was one of the reasons for higher palm oil price.

Yes, a little bit of problem in harvesting in Malaysia and Indonesia because of COVID, but that was a short-term phenomenon. Because ultimately, the fruits will be black. Got it?

Talking about -- yes.

There is a delay in harvesting.

Talking about the Crop Protection segment, overall, we have seen a muted sow in FY '21, right, and all the crop protection company has shown a significant growth in FY '21. And we -- considering we have a lower base and subsidiaries are going to be good, so whatever the product launches we have done, can you talk about what kind of -- can we have a higher double-digit kind of growth in FY '22?

Well, that's what we are planning. As I already told you that it was not that we did not have our orders last year. We lost almost 7% -- 8% of sales and sales of products, which were very profitable. I can tell you that it was a hit with max, which we launched last year. We suffered because of COVID closure of our factory in Jammu, which cost us almost INR 40, INR 50 in sales. And that happened early in the season itself so it was very difficult to make it up. So today, I can definitely say that we are seeing a good we are seeing a good growth likely over FY '21 numbers in this year. We are also planning launch of an in-licensing product. The only thing we are waiting is that the clearances from here, which can come anytime. Unfortunately, CIB, Faridabad is also very badly hit by COVID. Several of their officials are down. So once they come back to the office, I think once the permission is granted, that product also will be launched by June or July.

So how many product launches we are planning for FY '22?

One only. Okay, just hold the line so I can tell you. So last year, we launched 2 -- actually, last year, we launched Hanabi for MIT side. This year, we will launch another product, which you will come to know in a month's time. And FY '19, we launched Hitweed Maxx.

So -- but the product launches will be in which segment? Is it the plant versus nutrient or pesticide?

It's a herbicide given by Japanese company.

The next question is from the line of Depesh Kashyap from Equirus Securities.

Sir, can you give a sense of the volume growth of the individual categories in Animal Feed in 4Q, please?

In?

In Animal Feed segment, what was the individual category, growth category, and volume growth, please.

Last year?

This quarter, this quarter, please. Yes.

Can you help?

Yes, so cattle grew by around 5%. Broiler grew by around 8% to 8.5%. Layer feed degrew 17% and the aqua feed category grew by around 35%.

Aqua feed degrew by 35%.

Sorry?

Degrew or grew by 35%.

Aqua feed grew by 35%.

Okay. Sir, the soya meal prices have increased very sharply over the last quarter, and you talked about the pass-through, but especially, we wanted to ask about the aqua feed in the special shrimp feed category, where it is a very organized market. How's the industry and you've been able to take the price hike here?

Yes, yes, yes. So if you ask me in last, say, 15 days, almost 6%, 7% prices have been hiked. And my sense is another 6%, 7% price hike will be taken in the coming weeks till March 31.

Very good, sir. Right. So in the palm oil business, can you really help with the [ SFV ] arrivals in the fourth quarter? And what was in the base quarter? And also, if the OE ratio, you can give, please?

The fourth quarter is it's a nonseasonal quarter,. I think it will be difficult to judge the business by those numbers. But we can definitely share, Varadaraj, you can tell?

So fourth quarter, it was around 32,000.

And OER was very high, no?

Yes, sorry?

OER was 19% plus.

Yes, correct.

And sir, what was in the base quarter last year, sir, what was the volume?

It would be around 39,000. So as we say, as we mentioned, this is a nonseasonal quarter so...

Yes, I understand. I just wanted to see the volume of your -- there I understand, yes. Sir, lastly, in the poultry category, so can you explain the 22% revenue growth? What was the mix? And why the margins went down so much in this quarter, while our peer has reported a better margin? So just want to understand what happened here.

So which numbers are you talking about here?

Poultry, sir.

Godrej Tyson?

Yes, Godrej Tyson.

Godrej Tyson, we had a revenue growth of about 22%. And we had margin -- actually, Jan, Feb were bird flu months. So even though we were very profitable in March, I think some of the profits went to balancing the losses made in Jan, Feb.

In the right quarter?

Yes. And what was the mix, sir, of the growth in this -- the entire category, like live poultry? Like did the Yummiez grow more or your light poultry grew more?

It's a steady growth. You want to know, I can tell you that...

Yummiez grew quite well in the fourth quarter.

The numbers, Varadaraj, tell them, in the statement as well.

Sorry. Yes.

Yummiez top line grew last year by 53% and contribution, which is margin after variables, grew by 78%. So Yummiez is steady. I think it is like any FMCG product with about 40% contribution margin. This year, again, we are expecting mid-teen to high-teen growth in this segment. The big debt was in the LIBOR, which is a commodity.

Understood. Right. Sir, and what is the expected CapEx plan for FY '22? I think in Astec you've already told INR 180 crores. So how much are you looking at in other segments?

I'll tell you. I'll tell you. I'll tell you. It is so easy to flip papers in the office, no? Not at home. So I think Astec is about INR 180. And another big investment is about INR 80 crores to INR 90 crores for a fish feed plant in Barabanki UP, which is under construction, but because of COVID, I think it is delayed by a month right now. So this plant will be commissioned sometime in February, March next year. So these are the 2 big investments. So total CapEx plan is close to about 300 crores.

And anything in Bangladesh program?

No, sir, Bangladesh, we still have that mill, which we have leased at a very small expense of about $0.5 million. We can double the capacity.

And sir, anything further advantage of taking the [ PLI ] advantage, anything regrew that you're doing?

So we are studying that for RCPB and our Astec Lifesciences business. But I think, off-line, we will be able to tell you more.

Next question is from the line of Madhav Marda from Fidelity.

My questions have been answered.

Okay.

We move to the next question from the line of Pulkit Singhal from Motilal Oswal Asset Management.

So the first question is on the oil extraction ratio you are mentioning of some technology that can improve the yields of, in that context, if you can talk a bit more about it, how much improvement do you expect? And what is this technology?

So oil extraction ratio, we pay the farmers based on rate. So we pay close to about 15% of oil price as the fruit price and by weight. And farmer is not responsible for oil extraction ratio, which ranges from 17% to 19.5% during the year depending on the season. Because in hot season, oil extraction ratio comes down and once the weather becomes cooler, and when we move towards October, November, the oil content in the fruit continuously goes up because you have benefit of water also with monsoon. So the kind of technologies we have, which is planned as well as some additives, and this is some continuous stabilization technologies, which improved the oil extraction ratio by between 0.4% to 0.6%. So this 0.4% to 0.6% is a direct injection into PBT.

All right. Okay. And this would be visible -- and is this would only be visible in your coaching business? Or did you expect it to be seen this year?

The technology we were working for the last 2 years. First, in FY '19, we set up a pilot plant of 1 tonne per hour to test out all these technologies because one of the big problems in agriculture is what works in Malaysia may not work here or may not work in Costa Rica. So importing technologies has a risk attached to it. So we set up a pilot plant and then throughout FY '19 and mid of FY '20, it was tested by our foreign partners as well as us. And once we were sure, then some additional equipment had to be added, which cost about $1 million a plant, so almost $2.5 million to $3 million worth of equipment was called for. And it was set up in the first half of FY '21 in 1 plant, and we could see the benefit. And in second half of FY '21 in both the plant. So we are sure that we will be able to reap a lot of benefits from these expansions. So because 0.5% oil on something like 5.5 lakh fruits is a lot of money.

Right. Yes. And the kind of price increase being seen like 70%, 80%. How much of this, I mean, has to be passed on to the farmer? And I mean, what kind of pricing you're going to lead with there?

Delta, so 80% roughly, I'll give you thumb rule. 80% of oil price will be fruit cost. After that, we have our variable costs and fixed costs. As Mr. Godrej said, that fixed cost -- or variable cost keep on changing. What we pay to the farmer keeps on changing. But fixed cost is fixed so the higher the price breathes, the improvement in margin is higher.

Right. And the minimum quarter is being priced with the to be international prices? The minimum cost, the 80% is linked to the international prices?

No, international prices, you should not take because we have about 37.5% duty plus rate, et cetera.

Okay, landed price.

Prices today in Indian rupees would be something like INR 78,000, INR 80,000, but our local price here is INR 1,23,000 a tonne.

Yes, it's based on the local price and it's adjusted every month.

Got it. Got it. And the second question was around the Animal Feed business. You mentioned about supply and market share gains. I understand that when the going stock distance should happen for a larger price. But as you are also expecting the industry to bounce back with prices going up, why didn't all these flows come back in?

So definitely, players come back and there is no doubt about it that they'll come because one of the big ingredients of our selling is also credit with these people, the local feed millers can give better than us. Because they have more ability to collect that. The issue is that there are 2 things happening. One is market contraction is there. Second is that the raw material prices are very high. Now if you ask me, normally, soya meal is bought in 40 tonne trucks because of freight benefits, et cetera. Now last year, at this time, 40-tonner was costing about INR 12, INR 13 lakh . Today, it is costing INR 26 lakh, INR 27 lakh. So if you see working capital involvement is also very high, plus with so much of volatility in the output market, the traders were also not willing to give credit to several people. So it's a mix of things which are happening. And we believe that it will help us get some more market share. Of course, we are heavily -- poultry market shares are volatile because of several reasons, but cattle fish, shrimp, et cetera, are very stable gains, whatever we have made.

The next question is from the line of Rohan Gupta from Edelweiss.

Sir, continuing on the animal feed business only. So sir, despite the lower revenues this year, we have seen a margin expansion from 4% to 6%. And if we see that the benefit of market share gain we are going to see the next year, and the top line is also going to see the volume growth, because of the operating leverage, what can be the margin expansion further from here? Can you just give some light on that, sir?

So I think you will see some very good numbers, what you saw in the last quarter, maybe 1 or 2 more quarters. But I think it was a classical commodity dependent business. But what we are very sure is that EBIT margin of cattle and poultry to be anything between 6% to 7%, closer to 7%. And in aqua feed, from 8% to 9% is something which is sustainable. And we are also looking at substantial improvement in volumes. I think what we have -- so what is our problem in FY '18 and FY '19, Mr. Prakash had asked me, was that we had set up a lot of capacity for Animal Feeds. So today, we have 22.16 million tonnes of capacity, and we are producing about 1.3 million, 1.4 million tonnes. We also want to expand the volume by 2, 3 lakh tonnes in next 2 years. We would have done that last year. Unfortunately, the market contracted. If that happens, we will get into a virtuous cycle where scale will start giving us major advantage. So we are banking very heavily on this year to turn a lot of things. But margin profile between 6% to 7% EBIT margin in cattle and poultry, 8% to 9% in aqua, in good times 9, and average 10 rate. But ROCE has been close to 75% to 90%.

Right, sir. Right. Sir, second question, you mentioned that this high agri commodity prices globally and where you mentioned that in the running biofuels and the government, globally everywhere, we just focused more on the clean energy. So do you see that this agri commodity price rally, which has been this year, almost across the commodities of 30% to 60%, 70% increase, the prices are not going to correct any soon and probably that world being adjusted here? Or maybe even higher from current level that is going to change the agri input industry dynamic completely for the next 3 to 4 years sir?

It's difficult to predict that. Mr. Godrej said depends on biodiesel mandates. At some point in time, the food prices or the food inflation, which accompanies high commodity prices will start hitting. And probably there'll be a clamor to reduce biodiesel mandates. If that happens, definitely, we can see some reduction in commodity prices. But I don't see that happening in next 6 to 9 months and 6 to 9 months is a very long time in commodity markets. So predicting about next 3, 4 years, very difficult.

Sir, yours is a unique company, which is having presence in both agri input and as the -- and output also, like in a poultry form and all where we are leading even the raw materials. So where do you see that this rising input led -- I mean input prices-led inflation, do you see that there is enough opportunity for you to pass on the rising cost in your end products like in annual food and chicken and all these categories? Or there has to be some -- pressure, has to be on the margins in the near term, sir?

I got it. So let me just tell you that one of the big -- sorry, in animal feed, in all animal feeds, there is a pass-through, albeit with a time lag. So the -- and there -- our positions help us tide over those time lags because raw material prices will rise now, and then we'll announce the price increase, and the industry will also announce the price increase. And it'll take 7 to 10 days for it to come into effect. That's point number one. Point number two, in real good chicken, particularly, we have quarterly contracts with all these big QSRs and everybody because food service is a very big part of our business. So we will have to wait for 3 months to renegotiate prices. So that is one of the problems. Second thing in dairy, the big problem which happened with us was that the -- and you must be knowing that in -- from Jan to April, there was a secular increase in ex farm prices. And just because some of the states were going through elections, the consumer prices were only increased in the first week of April and that to INR 1 or INR 2 or INR 3 in different states. Now that has hurt us very badly in milk. But suddenly, the demand has dropped because of lockdowns. Today, the milk prices have come down INR 4, INR 5 a liter in Maharashtra and about INR 2, INR 3 a liter in rest of the other states. And still there is a surplus of milk. So this is commodity. This is what -- how things can change. This is the time when we were expecting huge milk shortages, had there been no COVID, and now there is a surplus. So things are very dynamic and volatile, I think, sitting in my seat, not very easy.

But I should mention that because of our R&D initiatives, we need less raw materials to make the same quality feed.

That's true. I think we are concentrating the feed a lot, so quantity for -- of very high end feeds is very less to be fed to the animals.

Fine, sir. And just on the last question from my side, if I'm allowed to ask, sir, on our life sciences and agrochemical business -- I mean Crop Protection business, if you can, I mean, share your vision probably for the life science business. We are seeing that globally, many of the industry players are seeing significant growth in inquiries and a large number of opportunities are coming to Indian manufacturer with the China Plus One model going globally and people are trying to reduce their dependency from China. In this sense, sir, if I can just -- if you can a little bit elaborate here that how you see your business in the next 3 years? And what kind of CapEx and -- we are in a position to put up the next 2 to 3 years. And have you also seen increased inquiries from global players in this segment? Because we have very solid R&D-driven business model in Astec Lifesciences and Crop Protection. Sir, I just want to...

Astec Lifesciences, as I told you, that we are getting a lot of inquiries. I think like all other agrochemical companies, we are also in the game. We commissioned their herbicide plant recently, cost us more than INR 115 crores. And that will be almost 1/3 capacity utilized in the current year. So -- and it will make intermediate -- herbicide intermediates for 1 Korean and 2 Japanese giants, I would say. So that said, another INR 180 crores CapEx is planned. I think most of the work has already started. The R&D center in Rabale is under construction. In a year's time, that will be up and running. But we are not waiting for that. We have hired a big R&D center, which was available in Dombivli. Our R&D stems from about 35 people has already reached about 70 people in Astec Lifesciences and will grow 100 people by December while we are preparing for our own R&D center. So we believe that we will continue another INR 120 crores CapEx, which has to be made in FY '23 and FY '24 is on the anvil and it is being studied by experts. Regarding CPB, CPB, I just want to tell you that growth will be largely driven by new products. There are at least 6 products, 4 in-licensed and 2 of our own, which are under different stages of registration. And 1 or 2 products, I don't have the details, but offline we can give per annum will be launched in FY '22, FY '23, FY '24 and FY '25. So that will result in almost 7%, 8% of growth and about 8%, 9% to 10% growth will come organically. So we are expecting 14%, 15%, 16% growth in our CPB business. Half of which is driven by new launches. And as far as we have maintained good margins in our CPB business. So we believe that we will be able to maintain EBIT margins of anything about 26%, 25.5%, 26% for time to come.

So there's one clarification in our asset life sciences. If you can give that -- what was kind of volume growth, I think, that there was some price-led elements immediately was there. So what was the volume growth for the full year, sir? Your revenue was 6%.

So revenue growth was about 6%, whereas volume growth was more than 11%, 12% because some of the prices have come down. But more details can be given offline, yes.

We take the last question from the line of Abhijit Akella from IIFL Securities. .

Just 1 clarification. On the animal feed side and on the poultry and dairy side, any volume outlook you could give us for the next 1 to 2 quarters? I know it's difficult to, given the volatile environment, but can we still expect to see volume growth in the next few months?

So it depends on how COVID shapes up. And I am a born optimist. So I believe that by end of May, things will start opening because [ the ] world has to go on. I'm saying that things will start opening slowly. And if not Q1 -- definitely, Q2 will definitely be much, much better than Q1. So my view is that animal protein prices, particularly chicken and eggs will be very good. You will see volume growth in Yummiez volume growth in our live bird sales with improved margins also. Our worry continues to be liquid milk. We will grow very well in our value-added products. Unfortunately, it is a small part of our business. We would like the growth to be very, very good, which is likely to come. Our milk, traditionally, we had a problem, which we got exposed to during COVID. It was almost 40% of our liquid milk sales came from institutional segment, and that institutional segment for last 5 quarters is in bad shape. And in Southern India, more than anything else, the tea shops, the coffee shops and the marriages and parties, et cetera, consume a lot of milk products because of both card and milk. I think because of that, the institutional segment is very badly hit. It takes a lot of time to build a retail milk sale, which we are trying in South. Over the last few quarters, things have improved Q-on-Q, but not still at a level where it can cover all the damage the loss of institutional sale has done. So definitely, this will be felt, but I am very sure that margin improvements will happen in poultry business, as well as milk business because milk prices ex pharma have also started catching because of surpluses.

I would now like to hand the conference back to the management for closing comments.

Thank you. I hope we have been able to answer all your questions. If you have any further questions or would like to know more about the company, we would be happy to be of assistance. Stay safe and stay healthy. Thank you once again for taking the time to join us on this call.

Thank you. Ladies and gentlemen, on behalf of Godrej Agrovet Limited, that concludes this conference. We thank you all for joining us, and you may now disconnect your lines.