Mr. Amol S. Sheth, Chairman & Managing Director, Anil Ltd. Hemant P. Maradia / 11:07 , Apr 16, 2012 “Margins are showing upward trends on YoY basis due to change in sales composition to value added products and measures taken to improve operational efficiencies.” Mr. Amol S. Sheth, Chairman & Managing Director, Anil Ltd. is the principal promoter member of Anil Group of companies. He is in the business for more than 15 years and is involved in all facets of business operations and management of group companies. In his role as the Chief Mentor for the Anil Group, he is architecting an aggressive growth plan in the Bio-Industrial, Rural Infrastructure and Food Processing domain. Mr. Sheth has strengths in areas of Strategy and Finance. He works on strategy formulation and is relentless in his pursuit of professionalizing the business and plotting a visionary path forward. As a third-generation entrepreneur, his promising ideas and an inherently international outlook has contributed to the growth and success of the Anil Group. Amongst various first time initiatives, he was instrumental in getting an ERP (SAP) implemented in group flagship company, Anil Ltd. 10 years ago. He emphasizes on systems and processes and has been keenly championing the adaptation of modern management and work practices like 5S, Kaizen, Quality Circles, TPM and TQM. The Rs 5bn plus Anil Ltd. is the flagship company of the diversified Anil Group, headquartered at Ahmedabad. The agro and food processing company is a leading player in the Indian corn wet milling industry. Anil Ltd. is also the majority shareholder in the Anil Group’s upcoming Mega Food Park venture near Vadodara. The company is listed on the Bombay Stock Exchange (BSE) – its sales have doubled between FY08 and FY11, while net profit has shot up by over five times during the same period. The focus on introducing value-added products and emphasis on exports, has allowed Anil Ltd. to expand its product reach to more than 35 countries across the globe. Core strengths of Anil Ltd. are R&D, Technology and Product Applications. The company manufactures products which cater to over 30 different segments. The company manufactures a varied range of products, some of which include native starch, chemical starch, modified starches, dextrins, dextrose monohydrate, liquid glucose, corn syrup and sorbitol. Founded in 1939 by Chinubhai Sheth, Anil Ltd. is the oldest player in the Indian corn wet milling industry. The Rs 10bn Anil Group is a diversified business house with operations in the agri & food processing sector, biotech, hospitality, engineering, industrial commodities, agri-commodities, knowledge solutions and lifestyle products. In an exclusive interaction with Hemant P. Maradia of IIFL, Mr. Sheth says, “Margins are showing upward trends on YoY basis due to change in sales composition to value added products and measures taken to improve operational efficiencies.” Could you briefly take us through the Q3 FY12 results? What led to the 17% jump in net sales? Explain why growth in EBTIDA and PAT was lower? The sales growth of 17% is mainly driven by our value added starch, specialty starch and downstream products. The export segment is also performing well with growth of over 80% y-o-y. There is a marginal improvement in the EBITDA margin which was at 19.4%. This is due to change in sales composition from commodity starch to value added & specialty starches. Meanwhile, the net margin has dropped marginally due to increased interest cost in present adverse interest rate scenario, as the rate cycle is at a peak. Are you facing margin pressure? If yes, explain the factors affecting the margins? No, there is no pressure on gross margins. The net margin will be little lower due to higher interest burden. Which are the product categories where you are witnessing margin pressure? Currently commodity (basic) starch segment is witnessing margin pressure due to industry cycle and higher raw material cost. Do you expect margins to improve going forward? Margins are showing upward trends on Y-o-Y basis due to change in sales composition to value added products and measures taken to improve operational efficiencies.
Give us a break up of your net sales for Q3 in terms of verticals ? Also tell us where do you see this business mix going forward? The sales break-up is as under
Product Group Biological Agents Food Pharma & Animal Industrial Allied Products Others Total
9 month ending Dec 2011. (Rs. in lacs) 5126 23888 14793 97 43904
What was the contribution of exports during Q3? Exports contributed around 12.5% of the total sales value. Which are the sectors that are driving growth? Major segments driving growth are food, Pharma, Textile, and animal feed. Give us a sense of the cost reduction measures that you are taking? Key initiatives include improvement in plant uptime, cost reduction through energy conservation and efficiency improvement (manufacturing), waste management program, house-keeping and safety measures. Optimizing internal resources by streamlining processes and systems has helped improve productivity. When do you hope to start construction of the Mega Food Park? What is the timeline for completing the same? It will take a month or so to complete all formalities following which the construction will start. The park will provide all infrastructural facilities for food processing units who wants to put up their industry in the park. Right from food testing laboratories and cold storages to instant freezing, we will provide quality facilities. It will take at least two years for the park to be fully commissioned. What was the rationale behind setting up the Mega Food Park? Will you also build more such Food Parks going forward? With a vision to grow the agri amd food processing business wherein creation of “farm to fork” infrastructure being one of the most imp area, Mega Food Park is a initiative that will help link the industry and farmers by building the state of the art infrastructure the Mega Food Park will also help Anil Group leverage its presence in Corn Wet Milling, Food Processing, Milk & Dairy Products, and Hospitality sectors, to integrate different aspects of food processing and agri-business supply chain which will result in increased realization for farmers by creating rural processing infrastructure, reduction of wastage, capacity building of producers & processors and creation of efficient supply chain. The presence and establishment of major players from food ingredients, processed food and food packaging industry in Mega Food Park will generate sustainable direct / indirect employment opportunities for people thereby contributing towards sustainable rural development. Currently 20-25% food produce in India is lost due to lack of processing facilities and inadequate infrastructure for postharvest – thus the food processing sector offers huge potential for investments across canning, dairy and food processing, specialty processing, packaging, frozen food / refrigeration and thermo processing. Anil Group of Companies aims to create socio-economic impact by creating new income opportunities for farmers thereby contributing towards upliftment of rural population. The Mega Food Park will comprise of world class units with modern infrastructure, latest technology and offer adequate training through Centre of Excellence along with appropriate market linkages. The purpose is to facilitate government’s vision of promoting Food processing industry by establishing infrastructure for state-of-the-art Mega Food Park. Anil Group is committed towards becoming a trusted partner of Government for rural development initiatives. How strong are your R&D and product development skills? How much do you spend on them each year?
ANIL’s state of the art R&D Laboratory has been accorded recognition by Department of Science and Technology, Government of India. Key activities of R&D is to focus on new products and application development, keeping abreast with latest developments worldwide, process reengineering to optimize product cost and providing customized solutions to customers. R&D works very closely with the customers along with the application development department to provide an optimal solution. The comprehensiveness of the R&D activities gives the group confidence to technologically brace itself for developing critical capabilities, and meeting all challenges. The R&D also works closely with few leading scientific institutions of India. The spending to R&D is around 1 to 1.5% of total revenue. What is the size of the market for the products that you make ? What is your market share? What are the entry barriers? What is your USP? Starch is one of the most popular biomaterial having diversified applications in the food and beverage industry, paper, pharmaceuticals, textiles and animal feeds Industries across the globe. Globally popular starches are corn starches, wheat starches, Potato starches, etc. However, corn starches are most popular and widely used starches across all applications. The present global starch market is around 70 mn MT and is expected to grow and reach around 80 million MT by 2015. The size of organized sector is was 2082 crore in 2010. The US is the largest market for starches having 51% of the market share in the total volume of starch consumed in 2009. China had the biggest growth with 17.5 million tons production and has surpassed the US with 13 million tons. During the period 2005-10, the Indian Starch Industry has grown at CAGR of 21.81% and is expected to grow at a 15% per annum in the coming years. The Indian Starch Industry is predominantly based on corn starches only and the usage of wheat starch is negligible Are you open to inorganic growth? We are open for any good takeover opportunity. What is the level of debt and debt-equity?. Our debt-equity ratio stands at 1.55. What kind of CAGR growth you see in topline in next 5 years? The topline CAGR is expected to be around 25% over the next five years.